how is social security determined?

[louisag]

Is it calculated on the 5 highest incomes over your lifetime? Thank you

[Opus 17]

Your benefit is determined from your highest 35 years of earning over your lifetime, adjusted for inflation. 

[louisag]

Thank you. How was that determined? Working from age 20 to 55 years as average? 

[Katherine S 63]

Thanks for the great questions.

https://www.ssa.gov/oact/cola/Benefits.html  This link is from the Social Security Department webpage and it goes over how social security is calculated.  I think you can sign in to your account but creating one and see what your estimated social security might be.  https://secure.ssa.gov/RIL/SiView.action  I have an account and they send me a yearly email with my contributions and other information.  You should be able to sign up for an email too.

Click on the above links or copy and paste them into a browser.

Hope this was helpful!!

Katie S.

[Cate9]

From the pdf link below:

Many people wonder how we figure their Social
Security retirement benefit. We:
• Base Social Security benefits on your lifetime
earnings.
• Adjust or “index” your actual earnings to
account for changes in average wages since
the year the earnings were received.
• Calculate your average indexed monthly
earnings during the 35 years in which you
earned the most.
• Apply a formula to these earnings and arrive
at your basic benefit, or “primary insurance
amount.”
This is how much you would receive at your full
retirement age — 65 or older, depending on
your date of birth.

Here is a link to the pdf that explains in depth how the calculations are made. https://www.ssa.gov/pubs/EN-05-10070.pdf

You can create an account with the Social Security Administration to assist in determining your benefits. https://www.ssa.gov/myaccount/

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[louisag]

Thank you so much Katherine. This is very helpful, although it is slightly Greek to me. Where did they come up with the numbers - like 3 - 8%? Is that due to inflation? 

[louisag]

Thank you Cate S. Why does retirement age stop at 70? Many people are working into their 80's and 90's now.

[Opus 17]

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@louisag wrote:

Thank you Cate S. Why does retirement age stop at 70? Many people are working into their 80's and 90's now.

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That's how Congress made the laws.  You can retire later than 70, but your social security benefit will not increase if you work later than 70. 

[Katherine S 63]

Gosh, I think you are referring to information on the SSA.Gov site?  I know that social security goes up pretty much each year based on many factors.  I also know that medicare increases each year too and this comes out of any social security payments.

Katie S

[louisag]

Thank you. Why is there a limit on how much you can earn without paying taxes if you are no longer eligible for social security? 

[louisag]

Thank you. I believe the social security income increases as the medicare costs increase. Is that true? 

[Opus 17]

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@louisag wrote:

Thank you. Why is there a limit on how much you can earn without paying taxes if you are no longer eligible for social security? 

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What do you mean, no longer eligible for social security?

[tagteam]

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@louisag wrote:

Thank you. I believe the social security income increases as the medicare costs increase. Is that true? 

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See https://www.ssa.gov/pubs/EN-05-10526.pdf

[Opus 17]

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@louisag wrote:

Thank you. I believe the social security income increases as the medicare costs increase. Is that true? 

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Your social security benefit is determined by your lifetime work history.  Each year, there is usually a cost of living increase to adjust for inflation.  Additionally, if you keep working after you declare retirement and start taking your benefit, your benefits might be adjusted higher if your extra work changes your lifetime earning history.  

Medicare premiums are deducted from your social security check.  If Medicare premiums increase, your social security check may be reduced.  Your benefit isn't changing, but the since the premium is subtracted from your benefit, your net payment may go down. 

[louisag]

Thank you