How Much Social Security Will You Get If …?

A report Saturday from The Motley Fool breaks down how a person’s Social Security retirement benefit is calculated, using an individual with an average annual income of $100,000.

According to the report, that person is estimated to receive $2,893.11 per month starting at age 70.

Getting from an average income of $100,000 during a person’s working years to the estimated full monthly retirement benefit takes a bit of math to understand.

The other important caveat is that the numbers likely will be different for everyone, depending on their individual work history as well as the age at which they choose to retire.

The first calculation, according to the report, is to determine the average indexed monthly earnings (AIME), which comes from the 35 years of  work history in which an individual made the most money.

The earnings during those years are indexed to what they would be if they were earned today, according to the report.

As an example, someone who earned $13,587 per year in 1982 would be the same as earning $52,000 annually today once wage inflation is factored in, with a maximum cap of $147,000 per year, according to the report.

Once the indexed values are known, they are added up, divided by 35 and then divided by 12 to get the monthly AIME.

Next, the report says, is to determine the primary insurance amount, or PIA, which is the monthly benefit at normal retirement age.

Using a person who turned 62, the minimum Social Security retirement age in 2022, it can be calculated by taking 90% of the first $1,024 of the AIME and adding 32% of the amount between $1,024 and $6,172, and also 15% of whatever is above $6,172 for the total.

If that person averaged $100,000 per year for their AIME, that would come out to a PIA of $2,893.11 per month at full retirement age of 67, which could increase to a maximum of $4,194 per month if they wait until age 70, according to the report.

The Social Security Administration has online tools to calculate the estimated retirement benefit of an individual.

The amount of benefits received will depend on retirement age, starting at age 62 with 70% of the maximum benefit, increasing slightly each month thereafter to 86.7% at age 65, and 100% at the full retirement age of 67 for those born after 1960, according to the agency’s website.

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