The first step is to go to https://www.ssa.gov/ and create a “My Social Security” account. Next you want to generate and download your personalized Social Security statement that will provide an estimate of your benefit for each year from 62 to 70. There is a catch: the estimates assume that you will have earnings of $54,489 until the year you claim benefits.
Actually, you can tell the estimator on the “My Social Security Account” page what your future earnings will be. It defaults to whatever your last reported year was but is easily changeable if you click the little down arrow. The actual catch is that if you are retiring early, the estimator only allows you to put 62 in as your earliest age of retirement. So, if you put a non-zero amount in for your future earnings, it will assume that you will make that amount until the date you’ve chosen for your retirement - which is at least age 62.
That means that for someone who is retiring before they turn 62, but isn’t retired yet, there isn’t a great way to get an accurate estimate - they can put in $0 for future earnings to see a low estimate, and then set their retirement age at 62 and put in whatever their current earnings are as the future amount to get a higher estimate. The actual benefit will be between those two amounts.
That said, especially if you already have at least 35 years of earnings, the estimate may not change that much. I’m 60 and retired in 2018, but had 42 years of earnings recorded before I retired. Even with some really low earning years before I started my ‘real’ jobs after college, and a couple of low earning years when I was in grad school, if I put in the amount that I earned in my last full year before I retired rather than $0 (which is my default now, since I’ve been retired for a few years), my monthly benefit at age 62 changes by $49; at age 67 (my FRA) by $145/month and at age 70, by $203/month. While an extra $50 - $200/month isn’t something to sneeze at, it certainly wasn’t enough to entice me to continue working.
Note - there are other benefit estimate calculators that can be used on the SS website. You can get them here https://www.ssa.gov/oact/anypia/index.html
If you don’t have 35 years of earnings, years without earnings are recorded with $0 earned income and your benefit will be less than indicated in your Social Security statement.
Nope. As long as you have earned enough credits to qualify for SS (40 quarterly credits), you can put $0 in for future earnings, and the estimator on the My Social Security page will figure your benefit with those $0 years are included in the 35 highest earning years. Other estimators may or may not do so, depending on which one you use.
Another catch: COLA is earned from age 62 and recursively applied to your Primary Insurance Amount (PIA) when you apply for benefit.
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I had 54 years of earned income when I retired and claimed benefits. Only the 35 years with the most earned income were used to determine my PIA to which COLA was recursively applied when I applied for benefits.
Not exactly. You are missing the indexing of wages earned before you are 60 to determine your 35 highest earning years. SS benefits are calculated based on your Average Indexed Monthly Earnings (AIME). To get your AIME, first you need to find the highest 35 years of earnings. To do that, your earnings from years prior to the year you turned 60 are adjusted to be comparable to the wages in the year you turn 60 by multiplying the ratio of the Average Wage Index (AWI) in the year you turn 60 divided by the AWI in the year you earned them, so that they are directly comparable to the year that you turned 60. The years after you turned 60 are not indexed, and are just taken at face value. The 35 highest years of earnings are then summed up and divided by (35 x 12) to determine your AIME. Your AIME is then applied to a bend point formula to figure your Primary Insurance Amount (PIA). COLA adjustments and adjustments for claiming early/late are then applied to the PIA when you do claim. Here’s the detailed explanation https://www.ssa.gov/oact/COLA/Benefits.html#aime
The maximum monthly benefit changes each year. I’m not sure how it is calculated.
It’s calculated based on applying the bend point formula to the AIME of someone who had maximum earnings for 35 years and is retiring at their full retirement age. https://www.ssa.gov/oact/COLA/cbb.html
AJ