How Is Social Security Calculated?
Updated October 2026 · 2026 figures from the Social Security Administration and IRS
Social Security is calculated from your 35 highest-earning years, adjusted for wage growth. SSA averages them into a monthly figure (AIME), applies a formula — in 2026, 90% of the first $1,286, 32% up to $7,749 and 15% above — to get your full benefit (PIA), then cuts or raises it based on the age you claim.
How is Social Security calculated, exactly? Below: each step in plain English, a fully worked example and the three things that change the result most. To skip the math, use the Social Security calculator.
Step 1: Your earnings are indexed for wage growth
SSA first adjusts each year's earnings up to age 60 for the growth in average U.S. wages since then. Earnings at 61 or later count at face value. Indexing means a $20,000 salary in 1995 counts much more than $20,000 today, so a career's early years aren't wasted. Only earnings up to each year's taxable maximum count — $184,500 in 2026 (SSA 2026 COLA fact sheet).
Step 2: The 35 highest years become your AIME
SSA picks your 35 highest indexed years, adds them up and divides by 420 (the number of months in 35 years). The result, rounded down to the dollar, is your average indexed monthly earnings (AIME). If you worked fewer than 35 years, the missing years count as zero, which pulls the average down.
Step 3: The bend-point formula gives your PIA
Your primary insurance amount (PIA) — the benefit at full retirement age — comes from applying three percentages to your AIME. The dollar limits are called bend points and are set for the year you turn 62 (Federal Register, Nov. 3, 2025).
Step 4: Claiming age adjusts the benefit
Claiming before full retirement age reduces your PIA by 5/9 of 1% for each of the first 36 months early and 5/12 of 1% for each month beyond that. Waiting past full retirement age adds delayed retirement credits of 2/3 of 1% a month (8% a year) until 70.
| Year of birth | Full retirement age | At 62 | At 70 |
|---|---|---|---|
| 1954 or earlier | 66 | 75% | 132% |
| 1955 | 66 and 2 months | 74.2% | 130.7% |
| 1956 | 66 and 4 months | 73.3% | 129.3% |
| 1957 | 66 and 6 months | 72.5% | 128% |
| 1958 | 66 and 8 months | 71.7% | 126.7% |
| 1959 | 66 and 10 months | 70.8% | 125.3% |
| 1960 or later | 67 | 70% | 124% |
Step 5: Cost-of-living adjustments
From the year you turn 62, your PIA rises with each annual COLA, even if you haven't claimed yet. The 2026 COLA was 2.8% (SSA 2026 COLA fact sheet).
Worked example: born 1964, average AIME of $5,000
Maria was born in 1964, turns 62 in 2026 and her 35 best indexed years average $60,000, so her AIME is $60,000 ÷ 12 = $5,000.
| Piece of the formula | Math | Amount |
|---|---|---|
| 90% of the first $1,286 | $1,286 × 0.90 | $1,157.40 |
| 32% of AIME from $1,286 to $7,749 | ($5,000 − $1,286) × 0.32 | $1,188.48 |
| 15% of AIME above $7,749 | none | $0.00 |
| PIA (rounded down to the dime) | $2,345.80 |
Her full retirement age is 67. If she claims at 62 she gets 70% of that, about $1,642 a month; at 67, $2,345; at 70, 124%, about $2,908 (before future COLAs). Her benefit replaces about 47% of her average pay; for someone earning twice as much, the share is lower because of the 32% and 15% brackets.
What changes your result the most
- Zero years. With 30 years of work, five zeros sit in your average. One more working year at a decent salary can raise your benefit for life.
- Claiming age. The gap between 62 and 70 is up to 77% more per month (70% vs. 124%).
- Earnings above the cap. Pay above the taxable maximum ($184,500 in 2026) doesn't raise your benefit — and isn't taxed for Social Security either (see the Social Security tax rate).
How is Social Security calculated for spouses and survivors?
A spouse can receive up to 50% of your PIA at their own full retirement age (less if they claim early; no credits for waiting past it). A widow or widower can receive up to 100% of what you were receiving, which is why the higher earner's claiming age matters for both — see Social Security survivor benefits. Total family benefits are capped at about 150% to 180% of your PIA.
Frequently asked questions
How is Social Security calculated in simple terms?
SSA takes your 35 best years of earnings, adjusted for wage growth, averages them per month (AIME), and pays back 90%, 32% or 15% of each slice of that average. The result is reduced if you claim before full retirement age and increased if you wait.
What are the 2026 bend points?
$1,286 and $7,749 of average indexed monthly earnings, for people who first become eligible (turn 62) in 2026.
Is Social Security based on the last 5 years?
No. It's based on your highest 35 years of indexed earnings, not your final salary. Recent years count only if they're among your best 35.
What happens if I worked less than 35 years?
Missing years count as zero in the average, lowering your benefit. Working extra years replaces those zeros and raises your benefit.
Does Social Security go up every year?
Yes, by the annual cost-of-living adjustment when inflation rises. The 2026 COLA was 2.8%, applied from the January 2026 payment.