How to Calculate Your Projected Social Security Benefits

Learn How Social Security Benefits Are Calculated and Where to Get an Estimate

Woman reading folder at desk in living room
A senior woman looking at her finances. Kevin Dodge/Getty Images

Social Security retirement benefits are often a critical component of a secure retirement. Most financial planning experts will factor in Social Security benefits as a source of income when assisting clients in determining how much they need to save to fund the retirement expenses. But in the end, for many clients, the amount of their future Social Security monthly benefit is just as estimate today and could change not only based upon their income today but also when they actually begin taking their benefit.

The reason for this is that assuming they are eligible for Social Security, a person's Social Security benefit is based upon two main factors:

  • How much money they earned during their working career
  • The age they choose to start to receive benefits

Your Work History Affects Your Social Security Retirement Benefits

First and foremost, in order to be eligible for Social Security retirement benefits, you or your spouse (or your ex-spouse or deceased spouse) must have earned a minimum of 40 credits over your working career. How those credits are calculated is rather complex, but most financial experts simply say that you likely qualify as long as you have worked for at least ten years, which is the minimum amount of time needed to earn those 40 credits. But your work history is not only used as part of the qualification criteria, it is also used to determine the amount of your full retirement benefit.

In calculating your full monthly retirement benefit, the Social Security Administration (SSA) considers your highest-earning 35 years of work history. If you worked less than 35 years, however, then you will have years where the SSA simply uses $0 for your earnings. Not surprisingly, the higher your earnings over those 35 years, the greater your retirement benefit will be as the greater contribution you have made into the program through FICA taxes.

Note, however, that there is a cap as earnings over the annual limit are not considered in your benefits calculation.

When You Collect Affects Your Social Security Retirement Benefits

The benefit amount calculated based on your working history assumes that you take retirement at your full or normal retirement age, which is dependent on the year you were born. For those born in 1937 or earlier, their (FRA) is 65. For those born between 1943 and 1954, the FRA will be age 66.  For those born between 1955 and 1959 the FRA is 66 plus a few months depending upon their exact birth year. The full retirement age for those born in 1960 and later is 67.

The monthly benefit you are eligible to receive at your FRA is what it is considered your full benefit, but it is not the minimum or maximum benefit you can receive.

Retirees also have the option to file for early retirement as early as age 62 but may also choose to delay their benefit until as late as age 70. While there are many strategic reasons why a retiree might choose to take early retirement or to delay, the effect that choice has a direct impact on the amount of the monthly benefit. By opting for an early retirement (any time between age 62 and your FRA), you are opting into a lower monthly benefit for the rest of your life.

By opting to delay your benefit to any age between your FRA and age 70, you effectively guarantee a permanent increase the amount of your monthly benefit.

Although your benefit increases every year in retirement due to annual cost of living allowances, these increases are always based on your previous year’s benefits. Therefore, once you take a reduced early retirement benefit, all of your future benefits will be smaller than they would have been had you delayed retirement until your normal retirement age or later.

How to Calculate Your Social Security Benefit

Calculating your estimated Social Security retirement benefit is no easy task, which is why the Social Security Administration (SSA) has made it possible for workers to go online or call and request a Social Security benefits estimate (Form SSA-7004) directly from the administration.

This estimate will contain an estimate of your benefit at age 62, your FRA, and at age 70 based on your current work history. In addition to these estimates, the SSA also has a series of including the "" that can aid you in planning for retirement with Social Security.

Looking for another helpful tool that shows how to maximize your Social Security benefits? AARP provides a that will help you estimate your future benefits and determine the best age to claim your benefits.