How Social Security Benefits Are Calculated
Your Social Security benefit is based on your 35 highest-earning years, indexed for inflation. The SSA calculates your Average Indexed Monthly Earnings (AIME), then applies a progressive formula to arrive at your Primary Insurance Amount (PIA) — what you receive at Full Retirement Age.
Claiming before or after FRA permanently adjusts that amount:
- Claiming early (before FRA): Reduced by 5/9% per month for first 36 months before FRA, then 5/12% per month beyond that
- Claiming at FRA: 100% of your PIA
- Claiming late (after FRA): Increased by 8% for each year past FRA, up to age 70
Full Retirement Age by Birth Year
| Birth Year | Full Retirement Age | Reduction at 62 |
|---|---|---|
| 1943–1954 | 66 years | 25% |
| 1955 | 66 years, 2 months | 25.83% |
| 1956 | 66 years, 4 months | 26.67% |
| 1957 | 66 years, 6 months | 27.5% |
| 1958 | 66 years, 8 months | 28.33% |
| 1959 | 66 years, 10 months | 29.17% |
| 1960 or later | 67 years | 30% |
Frequently Asked Questions
What is Full Retirement Age for Social Security?
Full Retirement Age (FRA) is when you receive exactly 100% of your earned benefit. For anyone born in 1960 or later, FRA is 67. For those born 1955–1959, FRA gradually increases from 66 years 2 months to 66 years 10 months. You can find your exact FRA using the Social Security Administration's online tools at SSA.gov.
What happens if I claim Social Security at 62?
Claiming at 62 (the earliest possible age) permanently reduces your monthly benefit. For those with FRA of 67, the reduction is 30% — so a $2,000 FRA benefit becomes $1,400/month. You'll receive more checks (starting 5 years earlier), but each check is smaller. The total amount equalizes around age 78-80, depending on your benefit amount.
When should I start claiming Social Security?
The math: if your FRA benefit is $2,000 and you claim at 62 ($1,400), you need to live to about age 79 for delaying to FRA to "break even" in total lifetime payments. Claiming at 70 ($2,480) breaks even around age 82-83. If you're in good health and have family history of longevity, delaying is usually the better financial decision. Married couples should also consider that the higher earner's benefit becomes the survivor benefit.
What is the maximum Social Security benefit in 2026?
$4,152/month for someone claiming at FRA in 2026, who earned the maximum taxable wage base ($184,500) for at least 35 years. At age 70, the maximum benefit is $5,148/month. The average retired worker benefit is approximately $1,976/month due to the 2.8% COLA for 2026.
Does working while collecting SS reduce my benefits?
Before FRA: if you earn over $24,480 in 2026, $1 in benefits is withheld for every $2 over the limit. In the year you reach FRA: the limit is $65,160, and $1 is withheld for every $3 over. Once you reach FRA, no earnings test applies — work as much as you want with no benefit reduction. Plus, withheld benefits from before FRA are added back to future payments.
Are Social Security benefits taxable?
Up to 85% of benefits can be taxed at the federal level. If your "combined income" (AGI + nontaxable interest + 50% of SS) exceeds $34,000 (single) or $44,000 (married jointly), up to 85% of benefits are taxable. Between $25,000–$34,000 (single) or $32,000–$44,000 (MFJ), up to 50% is taxable. Many states exempt SS from state income tax entirely.
What are survivor benefits and how do they affect claiming strategy?
When a spouse dies, the surviving spouse can claim the higher of their own benefit or the deceased spouse's benefit. This makes claiming strategy critical for married couples: if one spouse had a much higher benefit, that person should often delay to 70 to maximize the survivor benefit the lower-earning spouse will eventually receive. This is one of the strongest arguments for high earners to delay claiming.