Social Security Calculation

Did you know your Social Security calculation is based on the highest 35 years of employment?

35 years of Income

Social Security needs 35 years of income to calculate the Social Security benefit.

The 35 years can be with one long-term employer or ten employers, they don't care where you earned the income, they simply look at income totals and that Social Security was deducted by the employer (to make the income Social Security eligible).

Retire with 32 years of employment, and you have 3 years of ZERO earnings. Retire with 20 years of employment, and you have 15 years of ZERO earnings.

This can be pretty significant - the calculation below shows the differences in the average assuming you made $40,000 a year (you can easily recalculate using my formula below). This isn't your social security average, of course, but demonstrates how the 35 year average plays a major role in the SS calculation.

$40,000 earnings a year X 35 years = $1,400,000 divided by 35 years = $40,000 average

However, if you retire with 32 years:$40,000 earnings a year X 32 years = $1,280,000 divided by 35 years = $36,570 average

Even if you choose to retire early, and don't work 35 full time years, a few extra years of part time employment helps. Also, even if you work a few part time years after you retire, over and above the 35 years... if the few part time years worked now, earn more than your part time years during high school/college (which are adjusted by an inflation factor), your benefit will increase!

Great benefit to continue in a part time capacity! It's a win-win!

Low Income Earners vs. High Income Earners

Just another interesting thing, did you know that lower paid workers get a bigger percentage of their average income - compared to higher income workers? It's true!

Average Social Security Benefit

AARP reported, in their AARP Bulletin, that the average monthly benefit is $1,172/mo in 2010.

Married and Social Security

If you are/were married and haven't worked many years, click the link below to read about Marriage and Social Security...

Social Security continues here...