How your Social Security benefit is actually calculated

Your benefit is not a guess and not a flat rate. It is built from your 35 highest-earning years, run through a three-bracket formula, and then adjusted for the age you claim. Work through it once and every other number on this site makes sense.

The three steps, in order

Social Security calculates a retirement benefit in three steps. First, it takes your 35 highest-earning years of Social Security-covered work, adjusts each year for national wage growth, and averages them into a monthly figure called your Average Indexed Monthly Earnings, or AIME. Second, it runs your AIME through a formula with two thresholds called bend points, producing your Primary Insurance Amount, or PIA. Third, it adjusts your PIA up or down depending on the age you start claiming, relative to your full retirement age.

Only earnings up to the annual taxable wage base count. For 2026 that cap is $184,500. Income above the cap in a given year is not taxed for Social Security and does not enter the formula.

Step 1: the 35-year average (AIME)

Indexing matters because a dollar earned in 1995 was worth more than a dollar earned in 2025. The SSA indexes each year's earnings to the level of average wages in the year you turn 60, then picks the 35 highest indexed years, adds them up, and divides by 420 — the number of months in 35 years. The result is your AIME: your inflation-adjusted monthly career average.

If you worked more than 35 years, your lowest years simply drop out, which can only help. If you worked fewer than 35 years, zeros fill the empty slots, and those zeros pull the average down substantially. Someone with 30 strong years and five zeros is effectively averaging five empty years into the result. This is why working a few extra years late in a career can matter more than people expect: each added year replaces a zero or a low year.

Work credits are a separate test. You generally need 40 credits to qualify for retirement benefits, and you can earn at most four credits a year. In 2026 one credit requires $1,890 of covered earnings, so $7,560 of covered earnings earns all four credits for the year. Credits decide whether you qualify; the AIME decides how much you get.

Step 2: the bend-point formula (PIA)

Your PIA is the monthly benefit you would receive if you claimed at exactly your full retirement age. The formula is progressive by design: it replaces a much larger share of a low earner's income than of a high earner's. For workers first eligible in 2026 — that is, turning 62 in 2026 — the bend points are $1,286 and $7,749 of AIME:

90% of the first $1,286 of AIME, plus 32% of AIME between $1,286 and $7,749, plus 15% of AIME above $7,749.

Your bend points are locked to the year you turn 62, even if you wait until 70 to claim. Only the claiming-age adjustment changes after that. Bend points move each year with national wage growth, so a worker turning 62 in 2027 will use different thresholds.

Worked examples (2026 bend points)

Example 1 — AIME of $2,000. 90% of $1,286 is $1,157.40; 32% of the remaining $714 is $228.48. Total PIA: about $1,386 a month. That replaces roughly 69% of the AIME.

Example 2 — AIME of $6,000. 90% of $1,286 is $1,157.40; 32% of the remaining $4,714 is $1,508.48. Total PIA: about $2,666 a month, or about 44% of the AIME.

Example 3 — AIME of $10,000. 90% of $1,286 is $1,157.40; 32% of $6,463 is $2,068.16; 15% of the remaining $2,251 is $337.65. Total PIA: about $3,563 a month, or about 36% of the AIME.

The pattern is the point: doubling your career average does not double your benefit. Low earners get a higher replacement rate; high earners still get a larger check, but a smaller share of what they earned.

Step 3: the claiming-age adjustment

Your PIA is only the starting point. Claim before your full retirement age and the benefit is permanently reduced; claim after it (up to age 70) and it grows by 8% a year through delayed retirement credits. The full trade-off, with break-even illustrations, is covered in the claiming-age guide.

Cost-of-living adjustments (COLAs) are then applied to whatever amount you actually receive. For 2026 the COLA is 2.8%. Note that a COLA applied to a reduced benefit is a smaller dollar increase than the same percentage applied to a full benefit — one more reason the claiming decision compounds over time.

What to check on your own record

Your earnings record is the input to all of this, and errors in it are not rare. Create a my Social Security account at ssa.gov, open your earnings record, and check every year against your own tax documents. A missing year or a wrong figure flows straight into your AIME. If you find an error, SSA can correct it with evidence such as a W-2 or tax return — but it is far easier to fix years before you claim than after payments have started.