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Today’s article is so important as I will explain in this article that how your monthly Social Security benefits are calculated. If you are receiving retirement, disability, or even spousal benefits, in the United States, you need to know how your benefits are calculated in order to receive the correct amount of your Social Security benefits.

Social Security Benefits’ Calculation  

There are not many people who know how exactly Social Security benefits are calculated due to different misunderstandings or not having enough knowledge of the same. Even most people do not know the basics about calculating their Social Security benefits and they only rely on information they receive from others. So, it is very important that you know all the information regarding calculation of your Social Security benefits, in order to receive correct monthly benefits.  

Misconceptions about calculation of Social Security benefits

Most of the people think that it is the last five years or last three years is what Social Security Administration (SSA) use to determine how much your Social Security benefits is, however, it is not correct. It is important to note here that Social Security benefits are calculated based on your highest 35 years of earnings, adjusted for inflation. Moreover, age is an important factor in determination of your Social Security benefits. Early retirement results in a reduced benefits while delaying it till 70 years of age will give you maximum benefits.

It is, however, pertinent to mention here that you do not necessarily need continuous 35 years of earnings, as SSA considers your highest 35 years of earnings, regardless whether they are continuous or not. Another important point to note is that everyone does not get the same amount and the benefits are based on individual earnings history.

Checking your 35 years Earnings History Record

Before doing anything else, you first need to check your 35 years earnings record with Social Security Administration. And to do so, you need to create a personal Social Security account on the official website of Social Security Administration. After creating the account, you can access many things including your Social Security Statement, which provides a detailed record of your earnings history. make sure your benefit, your benefit, your earnings record is correct.

Another way to get your Social Security statement is by directly contacting Social Security Administration, either by visiting your local SSA office or by phone. The Social Security will then mail your paper copy to your home or email address. The statement will help you to a great extent in understanding that how it contributes to your Social Security benefits.

The Average Indexed Monthly Earnings (AIME)

The Average Indexed Monthly Earnings (AIME) is an important factor in calculation of your Social Security benefits. It is pertinent to mention here that Social Security Administration uses this indexed average to determine your Primary Insurance Amount (PIA), which serves as the baseline for your monthly benefit. It is important to note that AIME represents your average earnings over the highest 35 years of your working life, adjusted for inflation.  

Full Retirement Age

As I mentioned above that you are eligible to receive 100% of your Social Security benefits after reaching full retirement age. However, it varies person to person based on birth of years.

Early Retirement Reduction

You are eligible to receive your Social Security benefits after reaching 62 years of age, however, claiming Social Security benefits at 62 will result in reduced monthly amount. While delaying your benefits beyond your full retirement age will increase your monthly payments.  

Spousal Benefits

Married individuals are eligible for spousal benefits, which an be up to 50% of their spouse’s Primary Insurance Amount (PIA), depending on many various other factors, including claiming age, work history, indexed earnings, full retirement age, maximum earning limit and total years of marriage.

Government Pensions

If you are federal, state or local government employee and receive pension, it may affect the calculation of your Social Security benefits. It may be added here that the impact of government pensions on Social Security benefits is often influenced by the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

Windfall Provision and Government Pension Offset

It is important to note that Windfall Elimination Provision (WEP) mainly affects the calculation of an individual’s own Social Security retirement benefits, while Government Pension Offset (GPO) affects spousal or survivor benefits. These two provisions only come into play when individuals have pensions from non-covered government employment in addition to potential Social Security benefits.    

How to know your exact Social Security benefit amount?

It is important to note that you do not need to do your Social Security calculations by yourself. You just need to go to Social Security Website: where you can find your exact benefit amount at your full retirement age. Moreover, you can also find over there that what will be the total amount if you take early retirement i.e. 62 years of age.

It is pertinent to mention here that if you retire at 62, there will be around 30% reduction in your monthly benefits. Moreover, every month you retire early, it’s reduced a little bit, while every month you wait after your full retirement age, it increases up until 70 years of age. However, after you reach 70 years of age it will not get any further increase and will automatically stop, except COLA increase, cost of live allowances.


In today’s article I explained that how your Social Security benefits are calculated. In order to receive correct amount, you need to first know how these benefits are collected, as Social Security Administration sometimes makes mistake in calculation of your Social Security benefits. So, you should know all the different methods used to calculate Social Security benefits. In today’s article I made it very easy to understand how Social Security benefits are calculated.

I hope this article would benefit. However, if you need more information on this topic or any other related to Social Security, I have many articles on my website which might be beneficial to you. Moreover, if you have any questions about any issue related to Social Security, health insurance and other financial matters, you can leave me a comment with your name and email and I will respond you as soon as I could, please.

Thanks for reading

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