Retirement for Seniors

See How Social Security is Calculated | Retirement for Seniors
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See How Social Security is Calculated

Basic Facts About Social Security




Social Security Payment




Social Security Branch Offices




Most Americans who have spent at least part of their adult lives working will become eligible for Social Security once they retire. Social Security benefits may not be sufficient to provide for all of one’s needs in retirement — you many need a company pension or personal savings to supplement your retirement income and provide a comfortable retirement — but, for many, Social Security is a primary income source in retirement.

Social Security benefit formula

The Social Security Administration (SSA) employs a fairly complex formula to figure the size of your benefit check. Benefits are based on lifetime earnings. First, the SSA plucks out the 35 years in which you earned the most income, and bases its calculations on those years. It adjusts, or indexes, your earnings during each of those 35 years to account for changes in average wages since then. The SSA then applies a formula to your adjusted earnings to arrive at your basic benefit, or “primary insurance amount” (PIA). This is the benefit amount you would receive if you retired at full retirement age — age 65 for those born in 1937 or earlier, and up to age 67 for those born later.

The SSA’s website provides an example of how these calculations are performed. You can visit their website at to see exactly how your income would be indexed and your benefits calculated. Note that benefits checks are capped at $2,346 per month (as of 2011) for all recipients; retired business tycoons who earned seven-figure salaries plus benefits do not get outsized benefits!


Social Security is Calculated

Retire at 62 at a reduced rate

Various additional factors can change the amount of your benefit. Regardless of your full retirement age (somewhere between age 65 and 67, depending on your year of birth), you can elect to receive benefits as early as age 62, at a reduced rate. On average, if you retire early and begin collecting at age 62, your benefit checks will be about 25 percent lower than if you were to retire at full retirement age. Note that this reduced rate is permanent — your checks will not go up when you reach full retirement age — so if you don’t need the extra income at age 62, it’s usually best not to begin collecting early.

Retire at 70 at a higher rate

Conversely, you can delay taking your payments up to the time you turn 70. By delaying your benefits, the Social Security checks you eventually receive (starting at age 70, for instance) will be proportionately higher. For each year beyond your full retirement age that you delay receiving benefits checks, the size of each check will be 7 to 8 percent higher. Thus — if you can afford it — hold off. The increases stop at age 70, so there’s no point in delaying benefits payments beyond that age.

SSA does calculations for you

Fortunately, the SSA does not require that you calculate your own benefits payments. The SSA produces an annual statement for every eligible taxpayer over age 25, estimating eventually benefits. If you haven’t received such a statement, you can call Social Security or visit your local SSA service center and request one. Or, if you want to play with various numbers and possibilities, the SSA’s website provides a “Benefits Planner” page at where you can plug in your own numbers and see what your Social Security income will be.

If you have any questions about your benefits, or believe that your annual statement is in error, you can contact the SSA by phone (1-800-772-1213), mail, or by visiting your local service center. You can simply plug in your zip code at the appropriate page at the SSA’s website, and they will tell you where the nearest service center is located.

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