Q & A: October 2018

Q & A: October 2018

Q:  Can you tell me how Social Security benefits are figured?

I’m 63 and my wife is 61.  Both of us are still working.

A:  Social Security benefits are based on your lifetime earnings, age at retirement, and number of years worked.  You will need at least ten years of earnings to qualify for retirement benefits based on your own work record.

The Social Security Administration (SSA) keeps a record of your earnings, and they will adjust your actual earnings to account for changes in average wages since the year that the earnings were received.   The SSA then uses the 35 years of your highest earnings to calculate your average indexed monthly earnings.  The SSA applies a formula to these earnings, and arrives at your basic “primary insurance amount.”  At the end of this article, we provide a link to a worksheet from the SSA if you want to try calculating this yourself, or you can get a copy of your benefit estimate online by setting up a “my Social Security” account at www.ssa.gov/myaccount/.

Factors that affect how much you get include the following:

  • The amount you earn and the number of years you work.  The more you earn, up to the taxable maximum — which is $128,400 in 2018 — the higher your benefits.  But achieving 35 years of earnings may be a stretch for some retirees, especially moms and caregivers.  For example, if your wife took time away from work to have kids, or, if she would need to care for you if you get sick, this would potentially leave years in which earnings are much lower than others, or worse, years with no earnings at all.  Working longer can help fill in gaps in the earnings records and, for many workers, the highest earning years are the ones later in their careers.
  • The age at which you choose to retire.  Social Security benefits are reduced if you start benefits prior to your full retirement age.  Depending on when you were born, your benefits can be reduced by as much as 30%.  It’s to your advantage to keep working at least until your full retirement age.  Your full retirement age is the age at which you are eligible to receive unreduced benefits, and it depends upon the year you were born, as illustrated in the following table:
Year Born Full Retirement Age
1943 - 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67


Full retirement age, however, is not the age at which you qualify for your   maximum benefit, which is at age 70.  People who work past full retirement age qualify for delayed retirement credits of 8% per year or 2/3 of 1% for each month delayed past full retirement age until age 70.


For a worksheet to figure your benefit:  Your Retirement Benefit: How It’s Figured

Social Security retirement calculators