How are Social Security benefits calculated?

Throughout your working life, you accumulate an earnings record (sometimes called a work record). That’s the foundation the Social Security Administration (SSA) uses to calculate your benefits, using a three-step process.

First, the SSA adjusts your earnings for historical changes in U.S. wages, takes your 35 best-paid years and produces what it calls your average indexed monthly earnings (AIME). Only income up to the maximum taxable earnings — the annually adjusted cap on how much of your earnings are subject to Social Security taxes — is counted. In 2026, that’s work income up to $184,500.

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Second, they apply a formula to that monthly average to determine your primary insurance amount (PIA) — the monthly benefit you’re entitled to receive if you claim it at your full retirement age. That's 66 and 10 months for someone born in 1959 and 67 for people born in 1960 or later.

The formula breaks down your average monthly wage into three parts. In 2026, it is:

• 90 percent of the first $1,286 of your AIME;
• plus 32 percent of any amount over $1,286 up to $7,749;
• plus 15 percent of any amount over $7,749.

The sum of those three figures is your PIA, also known as your full or basic retirement benefit. The sliding scale is designed to weight the benefit to help low-wage earners, who need retirement money the most.

Finally, Social Security plugs in the age at which you claim benefits. They take a bite from the full benefit if you are younger than full retirement age — you can lose up to 30 percent of your benefit by at 62, the earliest possible age. But Social Security adds to your payment for each month between full retirement age and 70 that you delay claiming benefits. Someone filing at age 70 in 2026 qualifies for 129.3 percent of their full benefit.

Keep in mind

• The SSA recalculates your benefit annually, adjusting for inflation and factoring in the previous year’s income.
• If your previous year’s income ranks in your top 35 years of earnings, Social Security will shove aside a lower-earning year. That means your average monthly earnings figure will go up.
• If you worked fewer than 35 years, Social Security credits you with zero earnings for each year up to 35.