How Much Will Social Security Pay You?

Key takeaways

• Social Security uses your average monthly earnings over your working life, adjusted for inflation, to calculate your retirement benefit.
• You get 100 percent of that amount if you claim Social Security at full retirement age, but payments are reduced if you start them earlier.
• Open an online My Social Security account to get the best estimate of your future payments.

Summary

How much will you receive from Social Security? The key is how much you earn over your working life. The Social Security Administration takes your 35 highest-earning years, determines your average, inflation-adjusted monthly income, and uses that number to calculate your full monthly benefit. As Carly Roszkowski, AARP’s vice president of financial resilience programming, points out, understanding how your Social Security payment is set can empower you to make informed retirement-planning decisions and maximize your benefits.

Creating a My Social Security account at ssa.gov is the best way to review your personalized earnings record and get estimates of your potential payments at different claiming ages. You can file for retirement benefits at 62, but the longer you wait (up to age 70), the bigger your monthly payment will be, and the more you can take advantage of annual cost-of-living adjustments (COLAs) that help benefits keep up with inflation. Regularly checking your account not only gives you the most accurate information but also lets you catch and correct any missing or incorrect earnings, ensuring you get every dollar you’ve earned.

The key takeaways and summary were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.

Full Transcript:

[00:00:00] Alex from Nevada asked us, “How big will my Social Security payment be?” Here’s what you need to know.

[00:00:07] There’s no single magic number, but there are simple ways to figure out what your payment could be. The Social Security Administration uses a formula that looks at your entire working

[00:00:17] life. Understanding this helps you get a clearer picture of your future payment. The most important part is something called your average

[00:00:24] indexed monthly earnings or AIME. Think of it as your lifetime earnings average, but adjusted for inflation.

[00:00:32] Here’s how it works. Social Security looks at your entire work history and picks your highest earning 35 years.

[00:00:39] So if you had some low-paying years early in your career, like those years you were a lifeguard in college, those can get replaced by better earning years later on.

[00:00:49] If you have worked less than 35 years, then zeros will be factored in for every year until you reach 35 years.

[00:00:57] But even if you’ve already started getting benefits, you can knock out those missing or low-earning years and improve your AIME if you are still

[00:01:05] working and making better money. Social Security also adjusts your past earnings for inflation, so

[00:01:11] they update those old earnings to reflect what they’d be worth now. Once they calculate your AIME, Social Security uses a formula to

[00:01:19] figure out your basic payment amount. This is what you’ll get if you start collecting at your full retirement age.

[00:01:26] Right now, full retirement age is between 66 and 67, depending on your

[00:01:32] year of birth, but it’ll settle at 67 for people born in 1960 and after.

[00:01:38] There are a few things that can change this basic payment amount. If you start collecting before your full retirement age, your payment gets reduced.

[00:01:48] The reduction can be as much as 30% if you claim your retirement at 62, the minimum age.

[00:01:54] But if you wait past full retirement age, Social Security gives you a benefit

[00:01:59] boost, an extra 8% for each year you wait up to age 70. Another thing that affects your payment amount is that every year Social

[00:02:09] Security applies something called a COLA. That’s cost-of-living adjustment, which helps benefits keep up with inflation.

[00:02:16] So how do you find out your payment amount? The best place is your my Social Security online account

[00:02:23] at ssa.gov, where you can see your actual earnings record and get personalized

[00:02:28] estimates of your monthly payment at different claiming ages from 62 to 70.

[00:02:34] This is an incredibly powerful tool for retirement planning, and if you find a mistake, like if Social Security is missing some of your past earnings,

[00:02:43] you can contact them to get it fixed. It’s important to set it up and regularly check your online account.

[00:02:49] It’s the most accurate and up-to-date source for your personal Social Security payment information.

[00:02:55] So now you know. Thanks for watching. Please leave any Social Security questions you have in the comment section below

[00:03:03] so we can answer them in future videos. Or you can check out one of our other Social Security explainers in the corner of this video. Until next time.