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Why Is My Social Security Check Smaller Than That of Someone Who Earned a Similar Wage?

Your work record and age at retirement determine your benefit amount

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Know what factors could cut into your future benefit amount.

En español | Q: I get $1,250 a month in retirement benefits from Social Security. My brother-in-law gets $1,500. We had similar careers and our earnings were about the same. Why does he get more than I do?

A: There could be several reasons. Social Security benefits are based on your lifetime earnings, and it's possible that your earnings and your brother-in-law's differed somewhat through the years, however you may recall the numbers. (And keep in mind that people don't always tell you what they really make.) It would not be surprising to find there were significant differences early in your careers, when earnings tend to be unsteady or even missing for a year or two.

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Another factor to consider is the age at which you both began your benefits. You can start at 62, but at a reduced level. If you and your brother-in-law began at different ages, that could explain a difference in your payments.

In addition, if he continued to work after he began benefits and his earnings were higher than the earnings originally used in setting the amount, that could have pushed his benefit up.

Q: So how exactly does Social Security set the level of a benefit?

A: It determines the dollar figure using several complicated formulas. Computers do most of the work.

When you apply for benefits, the machines calculate what Social Security calls your primary insurance amount (PIA). It's the basic sum you're due when you reach full retirement age, now 66 for new retirees.

To come up with your PIA, Social Security computers go back through your year-by-year employment history and adjust or "index" the earnings numbers to reflect increases in national wage levels over the years. The idea is to convert your past earnings to present-day values and make your benefits reflect the general rise in the standard of living that occurred during your working lifetime.

The computers then base the PIA on the 35 years in which you earned the most. If you worked fewer than 35, zeroes are entered for the missing years.

The PIA calculation also reflects a key fact of life about Social Security: People who earned more generally get higher benefits than low-wage earners. To partially level this playing field, however, Social Security uses a progressive formula that tends to reduce benefits for high-wage earners and increase them for low-wage earners, who may have had fewer chances to save and invest for retirement.

For example, in 2013, someone who made only about $12,000 had roughly 60 percent of that income "replaced" by Social Security, while the figure for a person making around $26,000 was only about 37 percent.

Although the PIA establishes the number of dollars you're entitled to at full retirement age, your actual monthly payments can vary depending on when you start benefits. If you take them before you reach full retirement age, they'll be reduced. If you wait until a later age, your payments will be increased. Benefits top out at 70.

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Q: How much money do beneficiaries actually receive?

A: The maximum Social Security benefit at full retirement age in 2014 is $2,642 per month. To achieve this level, you would need to have made or exceeded the maximum amount of income that's subject to the Social Security tax, also called the FICA tax, for 35 working years. (In 2014, the ceiling is $117,000.)

But the average benefit for 38 million retired workers in 2014 is about $1,297 a month. About 2.3 million spouses of these workers receive an average of $651 a month, while 634,000 of their children get an average $634 a month.

Payments also go to about 6.2 million survivors of deceased workers. That group includes:

  • 1.9 million children, who receive a average $816 month.
  • More than 3.8 million widows and widowers, who get $1,246 a month.
  • 257,000 disabled widows and widowers, who draw $716 a month.

There also are more than 9 million adults whose benefits are based on disability:

  • 8.9 million disabled workers, who get $1,146 a month.
  • 153,000 spouses, who receive $308 a month.

Social Security estimates that last year, 88 percent of the U.S. population age 65 and older were receiving benefits. Also, about 96 percent of workers ages 20 to 49 had enough credits to acquire Social Security survivor protection for their children under 18.

Q: How can I find out what I'm likely to get in future benefits?

A: Social Security's online Retirement Estimator produces figures that are based on your actual Social Security earnings record. Keep in mind, though, that this is just an estimate. For additional help, Social Security representatives can be reached at 800-772-1213 (TTY 800-325-0778 ).

Social Security's website also has a work sheet that will give you an approximation of your benefit. Another option for estimating your monthly benefit is the AARP Social Security Calculator.

See also: Infographic: Health Care costs in retirement

Q: What can I do if I disagree with Social Security's calculation of my benefit amount?

A: One common reason why a benefit is too low is that some earnings are missing from your work record.

You can check your work record by signing up for a "my Social Security" account online. To ask for a correction, call Social Security at 800-772-1213 (TTY 800-325-0778 ). Be prepared to furnish proof of your earnings, such as W-2s, pay stubs or other evidence.

Even if you're not yet at retirement age, it's a good idea to take some time every few years to check your record. That's because Social Security generally limits earnings corrections to three years, three months and 15 days after the close of the relevant taxable year. But the rule includes a number of exceptions that may help you if you're trying to fix a mistake that's older than that.

If you still feel the number's too low, you have four levels of appeal. They are reconsideration (you ask Social Security officials to have another look), a hearing by an administrative law judge, a review by the Appeals Council and, finally, a federal court review. To appeal, you must make a request in writing within 60 days of the date you received the initial letter stating the level of your benefits.

Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question? Check out the AARP Social Security Question and Answer Tool.

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Databank USA infographic on percentage of people 65+ who rely on SS for 9-0% of their income.

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