How to estimate your Social Security benefits

Almost a quarter of future retirees who expect to receive Social Security either guess or don’t know how much their benefits will be.

Get a good idea of what you should expect in retirement from Social Security.

Social Security plays a vital role in the retirement planning of nearly every American. Yet it can be hard to guess how much you should expect from Social Security after you retire. By using some simple tools that are available, though, you can estimate how big your Social Security benefits will be when you need them.

Doing the hard math to get the exact answer

If you want to know exactly what to expect from Social Security, you’ll have to do a lot of legwork. To come up with the number, the Social Security Administration takes your entire work history, indexing your annual earnings for inflation and then choosing the 35 highest-earning years. Then, the SSA adds up those annual earnings for the 35 top years and then finds the average indexed monthly earnings.

After you have that number, you’ll run it through a formula that differs depending on your age. For example, if you’re turning 62 in 2017, then your benefit equals the sum of the following:

90% of the first $885

32% of the amount between $885 and $5,336

15% of the amount above $5,336

The result is the primary insurance amount, which is what your monthly benefit will be if you retire at full retirement age. If you retire early, then your benefits will be reduced. If you retire later, then you can get higher benefits. Delayed retirement credits for taking benefits past full retirement age amount to 8% per year, while the penalty for taking benefits early ranges from 5% to 7% per year.

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