How to Estimate Your Social Security Benefits

Social Security provides the foundation of retirement income for most Americans, replacing roughly 40% of pre-retirement earnings for average wage earners. Yet many people reach retirement age without understanding how their benefit is calculated, when to claim, or how to maximize their lifetime payments. This guide explains the benefit formula, the impact of claiming age, spousal options, and the recent repeal of WEP and GPO, so you can make informed decisions about your Social Security strategy in 2026.

How Social Security Benefits Work

Social Security is a federal insurance program funded by FICA payroll taxes. Workers and employers each pay 6.2% of wages up to the taxable maximum ($184,500 in 2026), plus 1.45% for Medicare with no cap. These contributions fund current retirees' benefits while earning you credits toward your own future benefits.

When you retire and claim benefits, the Social Security Administration (SSA) calculates your monthly payment based on your earnings history and claiming age. The program is designed to replace a higher percentage of income for lower earners, making it a progressive system. Higher earners receive larger absolute benefits but a smaller percentage of their pre-retirement income.

The average monthly retirement benefit in 2026 is approximately $1,900, while the maximum benefit for someone who earned at or above the taxable maximum for 35 years and claims at full retirement age is approximately $4,200 per month.

Qualifying for Benefits

To qualify for Social Security retirement benefits, you need 40 credits, which is roughly equivalent to 10 years of work. In 2026, you earn one credit for each $1,810 in wages or self-employment income, with a maximum of four credits per year. Once you have accumulated 40 credits, you are permanently eligible for retirement benefits, even if you stop working.

However, having just 40 credits does not guarantee a substantial benefit. The amount depends on your 35 highest-earning years. If you worked only 10 years, the remaining 25 years are counted as zeros in the calculation, significantly reducing your average earnings and your benefit.

For this reason, workers who are close to 35 years of earnings history can meaningfully increase their benefit by working additional years. Each additional high-earning year replaces a zero or low-earning year in the calculation, directly increasing the benefit amount.

How Your Benefit Amount Is Calculated

Average Indexed Monthly Earnings (AIME)

The SSA first adjusts your historical earnings to account for wage growth over time, a process called wage indexing. Earnings from earlier years are multiplied by an index factor that brings them to current-dollar equivalents. This ensures that wages earned in 1985 are compared fairly with wages earned in 2025.

After indexing, the SSA selects your 35 highest-earning years, sums them, and divides by 420 (35 years × 12 months) to produce your Average Indexed Monthly Earnings. If you have fewer than 35 years of covered earnings, zeros fill the gap, which is why working at least 35 years is so important for maximizing benefits.

Primary Insurance Amount (PIA)

Your Primary Insurance Amount is the monthly benefit you would receive if you claim at exactly your full retirement age. It is calculated using a progressive formula with bend points that the SSA adjusts annually.

For workers turning 62 in 2026, the PIA formula is:

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

This progressive structure means lower earners replace a higher percentage of their pre-retirement income. Someone with an AIME of $1,286 replaces 90% of their average monthly earnings through Social Security. A high earner with an AIME of $10,000 replaces only about 33%.

For example, consider a worker with an AIME of $6,000:

• 90% of $1,286 = $1,157.40
• 32% of ($6,000 − $1,286) = 32% of $4,714 = $1,508.48

PIA = $1,157.40 + $1,508.48 = $2,665.88 per month at full retirement age.

Full Retirement Age and Claiming Options

Your full retirement age (FRA) is the age at which you receive your full PIA with no adjustment. For anyone born in 1960 or later, FRA is 67. You can claim as early as 62 or as late as 70, but each month of deviation from FRA permanently adjusts your benefit.

Early Claiming at Age 62

Claiming at 62 (the earliest possible age) permanently reduces your benefit. For someone with an FRA of 67, the reduction is approximately 30%. This reduction is calculated as 5/9 of 1% per month for the first 36 months before FRA, and 5/12 of 1% for each additional month beyond 36.

If your PIA is $2,000 per month, claiming at 62 reduces it to approximately $1,400 per month. That $600 monthly reduction is permanent and applies for the rest of your life (though cost-of-living adjustments are applied to the reduced amount). Over a 25-year retirement, the difference between $1,400 and $2,000 per month totals $180,000.

Delayed Retirement Credits

For each month you delay claiming past FRA (up to age 70), your benefit increases by 2/3 of 1% per month, or 8% per year. This is one of the best guaranteed returns available in personal finance.

With a PIA of $2,000 at FRA (67), waiting until 70 increases your benefit by 24% (3 years × 8%) to $2,480 per month. That extra $480 per month adds up to $5,760 per year, every year, for the rest of your life, with annual cost-of-living adjustments applied on top.

There is no benefit to delaying past age 70. Delayed retirement credits stop accumulating at 70, so claiming at 71 gives you the same monthly benefit as claiming at 70, minus one year of payments.

Spousal and Survivor Benefits

Spousal benefits allow a lower-earning or non-working spouse to receive up to 50% of the higher earner's PIA. To qualify, the marriage must have lasted at least one year (or 10 years for divorced spouses). The spousal benefit is reduced if claimed before FRA. If you are eligible for both your own benefit and a spousal benefit, the SSA pays whichever is higher.

Survivor benefits provide the surviving spouse with up to 100% of the deceased spouse's benefit. A surviving spouse can begin receiving reduced survivor benefits as early as age 60 (50 if disabled). If the deceased spouse delayed claiming past FRA, the survivor receives the full delayed amount, making the delay strategy valuable for married couples where one spouse is likely to outlive the other.

The interaction between spousal, survivor, and individual benefits creates complex optimization opportunities for married couples. The higher-earning spouse delaying to 70 not only maximizes their own benefit but also maximizes the survivor benefit, which can provide financial security for decades after the first spouse's death.

Real-World Claiming Scenarios

Scenario 1: Early Retirement. Michael is 62 and was recently laid off from his manufacturing job. His PIA at FRA (67) would be $2,200. Claiming now gives him $1,540 per month. He has $120,000 in savings and no other pension income. While waiting until 67 would give him 43% more per month, Michael needs income now. He claims at 62, knowing the reduction is permanent, and plans to supplement with part-time work that stays below the earnings limit of approximately $23,400 per year.

Scenario 2: Maximizing as a Couple. Linda and Robert are both 64. Linda's PIA is $2,800 (she was the higher earner) and Robert's PIA is $1,200. Their strategy: Robert claims his own benefit at 62 ($840/month) to provide household income while Linda delays until 70 ($3,472/month). This maximizes Linda's benefit and, importantly, the survivor benefit. If Linda passes first, Robert's benefit jumps from $1,200 to $3,472. If Robert passes first, Linda continues receiving her $3,472. The strategy costs short-term income but provides maximum protection for whichever spouse survives.

Scenario 3: Break-Even Analysis. Patricia has a PIA of $2,000 and is deciding between claiming at 62 ($1,400/month) and 70 ($2,480/month). By age 70, early claimers have received 96 payments totaling $134,400. Delayed claimers receive $0 during this period. After 70, the delayed claimer receives $1,080 more per month. It takes approximately 124 months (about 10.3 years, or until roughly age 80.3) for the total cumulative benefits from delayed claiming to exceed those from early claiming. If Patricia expects to live past 80, delaying is the better financial choice.

Social Security Fairness Act: WEP and GPO Repeal

On January 5, 2025, the Social Security Fairness Act was signed into law, repealing both the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions had reduced Social Security benefits for approximately 2.8 million Americans who received pensions from work not covered by Social Security, including many teachers, firefighters, police officers, and other public employees.

WEP reduced the PIA for workers who had both Social Security-covered employment and non-covered employment with a separate pension. GPO reduced or eliminated spousal and survivor benefits for those receiving government pensions. The repeal means affected individuals now receive their full, unreduced Social Security benefits.

If you were previously affected by WEP or GPO, the SSA is recalculating benefits and issuing retroactive payments. Check your SSA account for updated benefit estimates.

Taxes on Social Security Benefits

Depending on your total income, up to 85% of your Social Security benefits may be subject to federal income tax. The taxability is determined by your "combined income" (adjusted gross income + nontaxable interest + half of Social Security benefits).

These income thresholds have not been adjusted for inflation since 1993, which means an increasing number of retirees are subject to benefit taxation each year. Strategies to reduce the taxable portion include managing IRA withdrawals, converting to Roth accounts before claiming, and timing income to stay below the thresholds.

Strategies to Maximize Your Benefits

Work at least 35 years. Since the formula uses your 35 highest-earning years, any year with zero or low earnings pulls the average down. If you have 30 years of earnings and can work 5 more years at a reasonable salary, each additional year replaces a zero in the calculation and directly increases your PIA.

Maximize earnings during working years. Higher earnings (up to the taxable maximum of $184,500 in 2026) directly increase your AIME and PIA. Pursuing promotions, salary negotiations, and career advancement during your working years has a compounding effect on your future Social Security benefit.

Delay claiming to 70 if possible. Each year of delay from FRA to 70 adds 8% to your benefit. For a married couple, having the higher earner delay to 70 maximizes both the retirement benefit and the survivor benefit, providing the greatest financial protection for the longest-living spouse.

Coordinate spousal claiming strategy. In a married couple, the lower earner may benefit from claiming earlier (perhaps at 62 or FRA) to provide household income while the higher earner delays to maximize both their retirement benefit and the survivor benefit. This sequencing strategy balances current income needs with long-term benefit maximization.

Monitor your earnings record. Errors on your Social Security earnings record can reduce your benefit. Review your Social Security statement annually and report any discrepancies. Missing earnings can be corrected with proof of income (W-2 forms, tax returns).

Consider the impact on taxes. When planning your claiming age, factor in the tax implications. If you have significant retirement account withdrawals, claiming Social Security could push your combined income above the taxation thresholds, effectively reducing the net benefit. Roth conversions before claiming can help manage this interaction.

Last updated: February 23, 2026