Author: Andrea Miller
Reviewed By: Kristi Bickmann

Social Security payments are calculated based on when you were born and how much money you have earned. The Social Security Administration uses a basic four-step process to figure out your benefit amount. First, the agency determines how much you earned each year that you worked. Then, it adjusts the number for each year to reflect the amount it would be in today’s dollars. Next, it averages the adjusted wages for the 35 years when you earned the most. Finally, the agency plugs this average into a formula to reach your benefit amount.

What other factors could affect the amount you receive?

Retirement age and inflation impact the amount of Social Security you receive. The Social Security benefit calculation assumes you will stop working at the full retirement age of 65. If you decide to start receiving payments earlier, the agency reduces your benefit amount by a certain percentage, depending on your age at retirement. If you delay your retirement, the agency increases your benefit amount by a specified percentage each year until you turn 70.

Your Social Security benefits also change over time. Once you start taking retirement payments, you will receive a cost of living increase each year. The Social Security Administration determines the annual amount based on the Consumer Price Index, a measure of inflation calculated by the Bureau of Labor Statistics.

Can I calculate my own Social Security payments?

You can estimate the amount of your Social Security benefits with the online calculator from the Social Security Administration. To use this tool, enter your birth date, the amount you made in the current year and the date you plan to retire. However, the calculation you receive will not be exact because the tool doesn’t use your actual earnings history. In addition, it only works for people who are at least 22 years old. Younger people haven’t yet earned enough to accurately estimate their benefits in retirement.