The Voorhes

Quiz: How Social Security Calculates Retirement Benefits

Test your knowledge of how the government determines your monthly payments

Andy Markowitz,

Updated March 19, 2024

AARP

En español

Published September 01, 2022

/ Updated March 19, 2024

10 Questions

[ {
 "question" : "Social Security retirement benefit calculations are based on:\n",
 "answers" : [ {
 "answer" : "The number of Social Security credits you have earned.",
 "correctAnswer" : false
 }, {
 "answer" : "Your lifetime earnings history.",
 "correctAnswer" : true
 }, {
 "answer" : "How much you have paid in Social Security taxes.",
 "correctAnswer" : false
 }, {
 "answer" : "Your life expectancy.",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "The Social Security Administration (SSA) uses this data from your tax filings, adjusted for historical wage trends, to derive what it calls your average indexed monthly earnings. It plugs that monthly average into a progressive formula to determine your benefit amount.&nbsp;\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to story\" href=\"https://www.aarp.org/retirement/social-security/questions-answers/social-security-benefits-calculation.html\">Learn more about the Social Security benefit formula</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "Why is the benefit formula called progressive?\n",
 "answers" : [ {
 "answer" : "It was proposed in the early 20th century during the Progressive Era of American history.",
 "correctAnswer" : false
 }, {
 "answer" : "It was implemented gradually, in progressive steps.",
 "correctAnswer" : false
 }, {
 "answer" : "It is weighted in favor of workers with lower incomes.",
 "correctAnswer" : true
 }, {
 "answer" : "It provides a bigger benefit if you have home insurance.",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "The more you earned during your working life, the bigger your benefit will be in raw dollar terms (up to a point). However, the formula provides proportionally higher benefits to people who earned the least during their working lives and are more likely to be dependent on Social Security in retirement.\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "How much of your income goes into calculating your benefit?\n",
 "answers" : [ {
 "answer" : "Every dollar",
 "correctAnswer" : false
 }, {
 "answer" : "Half of it",
 "correctAnswer" : false
 }, {
 "answer" : "Up to $400,000 a year",
 "correctAnswer" : false
 }, {
 "answer" : "The amount that’s taxed to fund Social Security",
 "correctAnswer" : true
 } ],
 "multiSelect" : false,
 "explanation" : "Each year, the SSA sets a threshold for how much of a worker’s income is subject to the payroll taxes that largely fund the Social Security system. That threshold — $168,600 in 2024 — is also the maximum amount of income Social Security can count from that year in figuring your benefit. This figure, called the “contribution and benefit base,” is adjusted annually to reflect changes in national average wages.\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "How many years of earnings go into calculating your benefit?\n",
 "answers" : [ {
 "answer" : "10",
 "correctAnswer" : false
 }, {
 "answer" : "25",
 "correctAnswer" : false
 }, {
 "answer" : "35",
 "correctAnswer" : true
 }, {
 "answer" : "Every year you paid income taxes",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "Social Security uses your 35 highest-earning years to derive your monthly average income and, from there, your benefit amount. If you worked for less than 35 years, you get credited with zero earnings for each year under the threshold.\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "At what age do you qualify to claim 100 percent of the benefit amount calculated from your lifetime earnings?\n",
 "answers" : [ {
 "answer" : "62",
 "correctAnswer" : false
 }, {
 "answer" : "65",
 "correctAnswer" : false
 }, {
 "answer" : "Between 66 and 67",
 "correctAnswer" : true
 }, {
 "answer" : "70",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "You receive your full benefit — what Social Security calls your basic benefit — at your full retirement age (FRA). Under law, full retirement age is 66 and six months for people born in 1957 and increases by two months for each subsequent birth year before settling at 67 for those born in 1960 and later. It used to be 65, but Congress voted in 1983 to gradually raise the age as part of a set of reforms designed to bolster Social Security’s finances.\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to story\" href=\"https://www.aarp.org/retirement/social-security/questions-answers/is-the-full-retirement-age-going-up.html\">Learn more about the change in retirement age</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "If you start benefits before full retirement age, Social Security ...\n",
 "answers" : [ {
 "answer" : "Permanently reduces your benefit.",
 "correctAnswer" : true
 }, {
 "answer" : "Reduces your benefit until you reach full retirement age.",
 "correctAnswer" : false
 }, {
 "answer" : "Reduces your benefit until you turn 70.",
 "correctAnswer" : false
 }, {
 "answer" : "Enrolls you in Medicare.",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "Starting Social Security early will lower your benefit by up to 30 percent, and the reduced rate is locked in for life. On the other hand, you can get up to 32 percent more than your basic benefit by waiting until age 70 to claim.\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to story\" href=\"https://www.aarp.org/retirement/social-security/info-2023/claim-benefits-early-or-late.html\">Learn more about deciding when to claim benefits</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "Which of these factors can affect the amount of your retirement benefit payment?\n",
 "answers" : [ {
 "answer" : "Being married",
 "correctAnswer" : false
 }, {
 "answer" : "Having kids",
 "correctAnswer" : false
 }, {
 "answer" : "Continuing to work",
 "correctAnswer" : true
 }, {
 "answer" : "All of the above",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "People who claim benefits before full retirement age and continue to work are subject to Social Security’s earnings test, which may temporarily reduce monthly payments. In 2024, most of those covered by the test lose $1 in benefits for every $2 in work income above $22,320. Much less is withheld in the year in which you reach full retirement age. Once you pass that milestone, the earnings test goes away and the SSA adjusts your benefit, so over time, you recoup the prior withholding.&nbsp;\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to story\" href=\"https://www.aarp.org/retirement/social-security/info-2023/working-and-your-monthly-benefit.html\">Learn more about how work can affect benefits</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "Collecting a pension can affect the amount of your Social Security retirement payment if:\n",
 "answers" : [ {
 "answer" : "You started getting the pension before claiming Social Security.",
 "correctAnswer" : false
 }, {
 "answer" : "You inherited the pension from a late spouse.",
 "correctAnswer" : false
 }, {
 "answer" : "The pension comes from a job in which you didn’t pay Social Security taxes.",
 "correctAnswer" : true
 }, {
 "answer" : "None of the above — a pension can’t affect your benefits.",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "A federal rule called the Windfall Elimination Provision (WEP) can reduce Social Security payments for people who qualify for benefits (via paying Social Security taxes on their income) but also receive a pension from other work in which they did not pay into Social Security (as is the case with some state and local government agencies). The WEP affects about 2.1 million people, or 3 percent of Social Security beneficiaries.&nbsp; &nbsp;&nbsp;\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "When can Social Security recalculate your basic benefit?\n",
 "answers" : [ {
 "answer" : "Never. It’s frozen when you file for Social Security.",
 "correctAnswer" : false
 }, {
 "answer" : "Every year",
 "correctAnswer" : true
 }, {
 "answer" : "Every five years",
 "correctAnswer" : false
 }, {
 "answer" : "When you die, to determine benefit amounts for your survivors",
 "correctAnswer" : false
 } ],
 "multiSelect" : false,
 "explanation" : "Your basic benefit can change annually based on whether there is a cost-of-living adjustment (COLA) for that year, based on the previous year’s inflation rate. In 2024, beneficiaries are getting a 3.2 percent COLA. Social Security will also increase your benefit if you worked the previous year and your income ranked among your 35 highest-earning years.\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to story\" href=\"https://www.aarp.org/retirement/social-security/questions-answers/how-often-does-ssa-recalculate-benefits.html\">Learn more about how Social Security recalculates benefits</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
}, {
 "question" : "The AARP Social Security Calculator can:\n",
 "answers" : [ {
 "answer" : "Provide an estimate of your projected future benefit, based on your earnings history, if you file at various ages.",
 "correctAnswer" : false
 }, {
 "answer" : "Help you see what percentage of daily expenses your Social Security payments can cover.",
 "correctAnswer" : false
 }, {
 "answer" : "Estimate the effect continuing to work could have on your benefits.",
 "correctAnswer" : false
 }, {
 "answer" : "All of the above",
 "correctAnswer" : true
 } ],
 "multiSelect" : false,
 "explanation" : "Knowing roughly how much you can expect to receive by claiming Social Security at various ages and how those payments fit into your overall budgeting are key elements of retirement planning.\n<a data-overlay-msg=\"AARP.Everywhere.LeavingModal.drawOverlay(this,'',/content/dam/content-fragments/aarp-org/en/quiz/retirement/social-security/social-security-calculation-quiz.html,'','You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.');return false;\" title=\"link to calculator\" href=\"https://www.aarp.org/retirement/social-security/benefits-calculator.html\">Try AARP’s Social Security Calculator</a>\n",
 "hint" : "",
 "hintLink" : "",
 "questionImgCaption" : "",
 "questionImgCredit" : ""
} ]

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Andy Markowitz is an AARP senior writer and editor covering Social Security and retirement. He is a former editor of the Prague Post and Baltimore City Paper.