Everyone has a retirement plan—but few understand how their Social Security benefits are actually calculated. Knowing how to estimate your benefits accurately is essential for building a stable and secure retirement. A Social Security counselor has shared six practical steps to help you calculate your expected benefits and plan for a more confident financial future.
Step 1: Check your earnings record
Your Social Security benefit is based on your lifetime earnings. Your first action is to check your earnings record by signing into your Social Security account at SSA.gov. The Social Security Administration (SSA) monitors your earnings and credits you receive each year. In 2025, you earn one credit for each $1,810 in wages or self-employment income, up to a maximum of four credits per year. Maintaining accurate records is important because missing or false earnings would lower your benefit.
Step 2: Inflate your earnings
Social Security will compute your benefit based on your Average Indexed Monthly Earnings (AIME), which level-adjusts your prior earnings for increases in the level of wages over time. To inflate and adjust for inflation is to have your benefit based on the actual value of your earnings. The SSA calculates your highest 35 years of earnings, so if you have any missing years, they are filled with zeros. That will decrease your average if you’ve only worked part of 35 years.
Step 3: Calculate your Average Indexed Monthly Earnings (AIME)
To find your AIME, sum your indexed earnings for your first 35 years and then divide by the number of months in those years (usually 420 months). For example, if your indexed earnings are $2.5 million, your AIME would be approximately $5,952.38 ($2,500,000 ÷ 420 months). This figure is the basis for your benefit calculation.
Step 4: Determine your Primary Insurance Amount (PIA) using bend points
The SSA applies a progressive formula, called “bend points”, to your AIME to determine your Primary Insurance Amount (PIA)— the monthly benefit you receive at your full retirement age (FRA). For 2025, the formula:
- 90% of the first $1,226 of your AIME
- 32% of your AIME from $1,226 and $7,391
- 15% of your AIME above $7,391
Using an AIME of $5,952.38, your estimated PIA would be approximately $2,615.80 per month at full retirement age.
Step 5: Check your Full Retirement Age (FRA)
Your FRA is based on your birth year and will tell you when you can collect full benefits. For individuals born in 1960 or later, FRA is 67. Taking benefits prior to FRA reduces your benefit payment, but taking it after FRA increases it with delayed retirement credits. Early withdrawals reduce benefits by 5/9 of 1% per month for up to 36 months early, and 5/12 of 1% for every additional month.
Understanding your FRA helps you plan when to claim benefits to maximize your retirement income. For more details, see: What is Full Retirement Age (FRA) for Social Security and which is my benefit by year of birth in 2025?
Step 6: Factor in Cost-of-Living Adjustments (COLA) and other benefits
Social Security benefits receive annual COLA increases to keep pace with inflation. While the exact COLA for 2026 is not yet announced, historical trends and inflation data can help estimate future adjustments.
Additionally, consider spousal, survivor, or disability benefits if applicable, as these can affect your total monthly Social Security income.
Helpful tools and calculators
- SSA’s official retirement estimator: Provides personalized benefit estimates based on your earnings record and planned retirement age.
- Social Security benefit calculator: A downloadable tool that calculates your Primary Insurance Amount (PIA), family maximum benefits, and adjustments for early or delayed retirement.
- Online COLA information: SSA’s page on COLA explains how inflation adjustments are applied to benefits.
To help you organize your calculation, here is a checklist you can download and use:
Social Security benefits calculation checklist
- Create or log in to your SSA account to access your earnings record
- Review your taxable earnings for each year and note any missing or incorrect entries
- Obtain the wage indexing factors for your birth year (available on SSA website)
- Index each year’s earnings up to age 60 using the NAWI factors
- Sum your highest 35 years of indexed earnings
- Calculate your AIME by dividing the total by 420 months
- Apply the SSA bend point formula for your year of turning 62 to find your PIA
- Determine your planned claiming age and calculate early or delayed retirement adjustments
- Review expected COLA increases for future years
- Use SSA calculators to verify your manual calculations
Calculating your Social Security benefits through these six steps gets you in contact with reality regarding what retirement is going to be like. It makes you the captain of whether to claim benefits early or late, how to augment them, and how to factor in the unknown. Since Social Security can be such a mainstay of retirement income for so many individuals, understanding peace of mind begins with knowing the numbers behind your benefits.
For personalized advice, think of engaging the services of a financial advisor who can customize solutions to your special situation and assist in maximizing your Social Security benefits.
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