How Social Security calculates your benefit
The benefit starts from your average indexed monthly earnings (AIME). SSA takes your earnings for each year up to the taxable maximum ($184,500 in 2026), scales earlier years up to today's wage level with the national average wage index, picks your highest 35 years and divides the total by 420 months. Fewer than 35 years of work means zeros in the average.
Your primary insurance amount (PIA), the monthly benefit at full retirement age, then replaces a shrinking share of each slice of AIME. For people who turn 62 in 2026:
PIA = 90% of the first $1,286 of AIME
+ 32% of AIME from $1,286 to $7,749
+ 15% of AIME above $7,749
The bend points rise every year with average wages, so the formula is just as generous for younger workers in today's dollars. Benefits then rise each year with the cost-of-living adjustment, 2.8% for 2026.
Claiming early or late
| Born | Full retirement age | Benefit at 62 | Benefit at 70 |
|---|---|---|---|
| 1943 to 1954 | 66 | 75% | 132% |
| 1955 | 66 and 2 months | 74.2% | 130.7% |
| 1956 | 66 and 4 months | 73.3% | 129.3% |
| 1957 | 66 and 6 months | 72.5% | 128% |
| 1958 | 66 and 8 months | 71.7% | 126.7% |
| 1959 | 66 and 10 months | 70.8% | 125.3% |
| 1960 or later | 67 | 70% | 124% |
Each month you claim before full retirement age cuts the benefit by 5/9 of 1% for the first 36 months and 5/12 of 1% after that. Each month you wait past it adds 2/3 of 1%, or 8% a year, until 70. The change is permanent.
A worked example
Born in 1986 and earning $75,000, the same share of average wages for a 35-year career: in 2024 wage terms that is about $69,342 a year, so AIME is $5,778. PIA is 90% × $1,286 + 32% × ($5,778 − $1,286) = $1,157.40 + $1,437.44 = $2,594.80 a month at 67. Claiming at 62 gives 70% of that, $1,816.36; waiting to 70 gives 124%, $3,217.55. Waiting from 62 to 70 pays off if you live past about 80 and a half.
Working while you collect
Before full retirement age, the earnings test holds back $1 of benefits for every $2 you earn above $24,480 in 2026. In the year you reach full retirement age the limit is $65,160 and $1 is withheld for every $3 above it, counting only months before your birthday month. Withheld benefits are not lost: your monthly amount is recalculated upward at full retirement age. From then on you can earn any amount.
Tax on benefits and the trust fund
Up to 50% of benefits are taxable when your provisional income (other income plus half your benefits) is over $25,000 ($32,000 for couples), and up to 85% above $34,000 ($44,000). Those thresholds have never been indexed. People 65 and over can claim an extra $6,000 deduction for 2025 to 2028, which offsets much of that tax for many retirees.
The 2026 Trustees Report projects that the retirement trust fund (OASI) can pay full benefits until late 2032, after which incoming payroll taxes would cover about 78% of scheduled benefits unless Congress acts. Counting the disability fund too, full benefits last until 2034 with 83% payable after. Past shortfalls, in 1977 and 1983, were closed by legislation before benefits were cut.