You can estimate your Social Security benefits years before you need the funds as part of your overall retirement plan. Knowing what you can expect from social security and then adjusting other aspects of your financial planning to incorporate that info puts you ahead of the game for the future. Here's how to do it.
Social Security is a type of insurance program for later in life. While employed, you pay into Social Security, typically through payroll withholding. If you’re self-employed, you pay Social Security taxes when you file your federal tax return.
How your benefits are determined:
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- Social Security uses your earnings and work history to determine your eligibility for retirement or disability benefits or your family’s eligibility for survivor benefits.
- You must earn a certain number of credits to be eligible for Social Security benefits.
- The number of credits you need depends on the age when you apply and the type of benefit you are applying for.
- For 2024, you will receive one credit for each $1,730 of earnings, up to a maximum of four credits per year. In 2025, you need to earn $1,810, and you must earn $7,240 to get four full credits.
How do you estimate your social security benefits?
Estimating your Social Security benefit is no easy task. In fact, it can be downright confusing. So, why is it important to know how to? After all, doesn't the Social Security Administration do all that work for you? While it's true that the Social Security Administration provides estimates for you, it can’t hurt to understand what goes into calculating your benefit amount so you know you’re receiving the benefit you deserve for all your hard work.
One way to estimate your Social Security benefits is to download (Form SSA-7004) from the SSA's website, which has an estimate of your benefit at age 62, at your full retirement age (FRA), and at age 70, based on your current work history. Unfortunately, because of its methodology, the Social Security benefits estimate is not always the most accurate account of what you can expect in the future.
Because Social Security is a big part of your retirement plan, it's important to know how much you're going to be getting and to incorporate that amount into other financial planning decisions. Follow these six steps to get a more complete estimate of your Social Security benefits.
1. Verify your wages
Rules stipulate that you must be at least 62 years old and have paid into Social Security for ten years or more to qualify for benefits. But you will receive higher monthly benefits if you wait to begin to collect your benefits until age 70. The benefit amount you receive is based on your average indexed monthly earnings (AIME) during your 35 highest-earning years as a worker.
Social Security keeps track of how much money you've earned each year you've worked in your earnings record. Your actual income and the income you’ve paid Social Security taxes on are usually the same. In 2025, you only pay Social Security taxes on the first $176,100 you earn.
2. Adjust your wages for inflation
Social Security uses the Average Wage Index (AWI) to adjust your wages for inflation, ensuring that only those years where you earn the most are used to calculate your benefit. The AWI you use is the one that was in effect when you turned 60.
Unless you’re retiring this year, your future Social Security payouts will account for inflation in the years between now and your retirement age. Social Security uses national average wage indexing to calculate your benefits, adjusting your earnings to account for inflation in the years prior to your retirement.
To keep things a little less confusing, the Social Security Administration keeps a list of all the indexing factors. Just input the year you turn 60, and it will identify for you which of the index factors to use.
3. Calculate your AIME
To calculate your Average Indexed Monthly Earnings, or AIME, add up your wages from your 35 highest-earning years. If you haven’t worked for at least 35 years, just add up your total income for the years you have worked so far. Keep in mind that a 0 will be used for years you didn’t work and included in the calculations, reducing your overall payout.
Divide this total by 420 (how many months are in 35 years). This amount will be rounded down to the nearest lower dollar amount and give you the correct figure to be used for your AIME.
4. Determine your PIA
To estimate your actual Social Security retirement amount, you’ll need to factor in “bend points.” These points are based on three separate percentages of your average indexed monthly earnings, as set by law. For 2025, your PIA will be the total of:
- 90% of the first $1,226 of your AIME
- plus, 32% of any amount over $1,226 up to $7,391
- plus, 15% of any amount over $7,391
The sum of these three figures is your PIA and is rounded to the next lower multiple of $.10 if it is not already a multiple of $.10, or essentially the next whole dollar. So $1,226.33 for example, would be rounded to $1,226 and $7,391.88 would be rounded up to $7,392.
5. Confirm your FRA
To get the largest monthly benefit available, it's best to wait until you reach your full retirement age, or FRA. If you can get by with a reduced amount, you can choose to start claiming your benefits early. However, as Social Security is a big part of most people's overall retirement plan, it's best to wait as long as possible before claiming benefits.
In fact, if you continue to work after you reach full retirement age or until you're closer to age 70 to retire, you might be eligible for delayed retirement credits, which would bring in additional monthly income.
Based on your birth year, your FRA is as follows:
Birth Year | Full Retirement Age (FRA) |
1943 to 1954 | 66 |
1955 | 66 + 2 months |
1956 | 66 + 4 months |
1957 | 66 + 6 months |
1958 | 66 + 8 months |
1959 | 66 + 10 months |
1960 and later | 67 |
If you choose to claim your Social Security benefits early or before your full retirement age, your checks will be reduced by:
- 5/9 of 1% per month up to 36 months
- 5/12 of 1% for each additional month if you claim more than 36 months early
6. Deduct your Medicare Part B premiums
If you are a senior, you will have your Medicare Part B premiums deducted from your Social Security check, automatically. In 2025, the amount deducted is $185.00, up from $174.70 in 2024. But if you're not yet on Medicare, don’t worry about deductions as they don't kick in until you sign up.
Key points
- To qualify for Social Security, you need to work for at least ten years.
- At retirement, your benefit is based on your 35 highest earning years.
- Your benefits may be increased or reduced depending on when you start taking them.
- You can collect 100% of your benefits at your full retirement age (FRA) which is determined by the year you were born.
Social Security calculator
Of course, you can always log into your Social Security page and calculate your benefits using the Social Security calculator. While that may be easier, understanding the steps to take to estimate your benefit can help you squeeze as much money as possible out of the program and also ensure you’re getting the benefit you deserve.
The Final Word
Social Security continues to be the central core of the U.S. retirement system. Although it was never meant to be your main source of income in retirement, it does come in handy as supplemental income. As a beneficiary, you'll receive a monthly check for the rest of your life, no matter how long you live or what happens with the economy.
Just keep in mind that Social Security recalculates your benefit annually, adjusting for inflation and figuring in your previous year’s income. If your last year's income is in your top 35 years of earnings, Social Security will delete a lower-earning year, which means your average monthly earnings will increase. If you worked fewer than 35 years, any years without earnings will be counted by Social Security as zero in your benefit calculation.
To stay up-to-date, read Five Changes to Social Security in 2025.
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