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How Much Does (and Will) Social Security Pay?

Social Security benefits are calculated using a formula that incorporates your highest-earning 35 years of work. The method applies a factor to your average monthly income during those years. To arrive at this figure, the total income from your 35 highest-earning years is divided by 420, the total number of months within that period. This results in your Average Indexed Monthly Earnings (AIME).

Those who haven’t worked for a full 35 years should note that "0" income years are included in this calculation, potentially decreasing your AIME. The final figure is then utilized to determine your monthly benefit amount at your Normal Retirement Age (NRA), a term referred to as your Primary Insurance Amount (PIA).

Understanding Normal Retirement Age and its Impact

For most of today's workforce, the Normal Retirement Age (NRA) is 67. However, those born before 1960 have a slightly lower NRA. Your chosen retirement age significantly influences the benefits you receive.

Starting to claim benefits at age 62, the earliest possible age, will reduce the benefits by up to 30%. However, for every year that benefits are deferred past the NRA, an 8% increase is applied. Deferral of benefits can't extend beyond the age of 70, regardless of continued employment. It's important to note that these calculations consider months, not just years, leading to more precise benefit assessments.

Spousal Benefits and Strategies

An additional aspect of Social Security is the availability of a spousal benefit. Each working person's spouse is eligible for this, allowing multiple potential strategies for married couples. One common approach is to claim one partner's benefits along with the spousal benefits while deferring the other's.

The "file and suspend" strategy, once a popular method, has been discontinued by the Social Security Administration. When one spouse passes away, the surviving spouse is entitled to the highest single benefit that was being received.

Annual Adjustments and General Benefit Ranges

The Social Security Administration introduces annual adjustments based on the Cost of Living Adjustment (COLA). This ensures that your benefits keep pace with inflation, maintaining their purchasing power.

In 2016, the average benefit paid to a married couple was approximately $2,200 per month. As a general guide, most people can expect to receive between $700 and $3,000 per month. The actual amount depends on the specific details of your employment history and the timing of your retirement.

In conclusion, understanding the intricacies of Social Security benefits can help you better plan your retirement finances. Remember to review your statements regularly to keep abreast of your projected or actual benefits. The final amount will be a function of your highest earning years, the age you start claiming, and whether you're married, among other factors.


Social Security uses a formula that applies a factor to your average monthly income from the 35 years in which you earned the most.

The benefit will be calculated for your Normal Retirement Age (67 for most people today), and you should receive statements in the mail keeping you updated on your projected or actual Social Security Retirement Benefits.

Every year, you should get a statement from the Social Security Administration that provides you with exact numbers. The amount depends on the age at which you retire, and the contributions you made to Social Security over the years. The formula uses the 35 years in which you earned the most, and divides it by the total number of months in 35 years, which is 420, which leads to your Average Indexed Monthly Earnings (AIME).

If you have not worked for a full 35 years, they will include the “0” years in the calculation. They plug that number into a formula to arrive at your monthly benefit amount at Normal Retirement Age (NRA) which they call your Primary Insurance Amount (PIA).

Normal retirement age for most people now is 67, but it is younger for those born before 1960. Benefits are reduced by up to 30% if taken early, with age 62 being the earliest people can start claiming benefits. Benefits are increased by 8% for every year they are deferred past NRA, but cannot be deferred past age 70.

These calculations take months into account, and not just years. Each working person will have a spousal benefit available to the spouse, and this can lead to various strategies being used by married couples if both worked, where they might claim one of their benefits, and the spousal benefits, while deferring the other spouse’s benefit.

There used to be a strategy known as “file and suspend,” but the Social Security Administration recently took that option off the table. After one spouse dies, the surviving spouse can claim the highest single benefit that was being paid.

Each year, Social Security makes adjustments to your benefits based on the “Cost of Living Adjustment” (COLA). The average benefit paid to a married couple in 2016 is about $2,200. Generally benefits will be somewhere between $700/month and $3,000/month.

How Does My Retirement Age Impact My Social Security Benefits?
What are the Projections for Social Security Benefits?

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