Social Security benefits depend on earnings
The amount of a person's retirement benefit depends primarily on his or her lifetime earnings. We index such earnings (that is, convert past earnings to approximately their equivalent values near the time of the person's retirement) using the national average wage index. See how we use earnings to compute a retirement benefit amount.
Benefit Examples For Workers With Maximum-Taxable Earnings
The initial benefit amounts shown in the table below assume retirement in January of the stated year, with maximum-taxable earnings since age 22. Benefits in 2013 reflect subsequent automatic benefit increases (if any). The table shows Average Indexed Monthly Earnings (AIME)—an amount that summarizes a person's earnings—and the corresponding monthly benefit amounts. Retirement at age 70 produces the highest ratio of retirement benefit to AIME.
|Retirement in Jan.||Retirement at age 62 1/||Retirement at age 65 2/||Retirement at age 70 3/|
|AIME||Monthly benefits||AIME||Monthly benefits||AIME||Monthly benefits|
|At age 62||In 2013||At age 65||In 2013||At age 70||In 2013|
|1 Retirement at age 62
is assumed here to be at exact age 62 and 1 month. Such early
retirement results in a reduced monthly benefit.
2 Retirement at age 65 is assumed to be at exact age 65 and 0 months. For retirement in 2003 and later, the monthly benefit is reduced for early retirement. (For people born before 1938, age 65 is the normal retirement age. Normal retirement age will gradually increase to age 67.)
3 Retirement at age 70 maximizes the effect of delayed retirement credits.
Note: Initial monthly benefits paid at ages 65 and 70 in 2000-2001 were slightly lower than the amounts shown above because such initial benefits were partially based on a cost-of-living adjustment (COLA) for December 1999 that was originally determined as 2.4 percent based on CPIs published by the Bureau of Labor Statistics. Pursuant to Public Law 106-554, however, this COLA is effectively now 2.5 percent, and the above figures reflect the benefit change required by this legislation.