topic Re: how is social security determined? in Retirement tax questions

how is social security determined?

louisag — Tue, 24 Feb 2026 06:52:01 GMT

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

Re: how is social security determined?

Opus 17 — Wed, 26 Jul 2023 17:50:34 GMT

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

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 17:52:57 GMT

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

Re: how is social security determined?

Katherine S 63 — Wed, 26 Jul 2023 17:53:27 GMT

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.

Re: how is social security determined?

Cate9 — Wed, 26 Jul 2023 17:56:52 GMT

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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Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:01:29 GMT

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?

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:04:58 GMT

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

Re: how is social security determined?

Opus 17 — Wed, 26 Jul 2023 18:07:04 GMT

@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.

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.

Re: how is social security determined?

Katherine S 63 — Wed, 26 Jul 2023 18:07:45 GMT

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

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:08:11 GMT

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?

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:09:07 GMT

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

Re: how is social security determined?

Opus 17 — Wed, 26 Jul 2023 18:11:48 GMT

@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?

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

Re: how is social security determined?

Anonymous_ — Wed, 26 Jul 2023 18:13:21 GMT

@louisag wrote:

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

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

Re: how is social security determined?

Opus 17 — Wed, 26 Jul 2023 18:14:35 GMT

@louisag wrote:

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

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.

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:15:32 GMT

Thank you

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:26:42 GMT

Once you are no longer earning social security points and are retired, why is there a limit on how much money you can earn without paying taxes? I think the limit is $50k.

Re: how is social security determined?

Opus 17 — Wed, 26 Jul 2023 18:33:42 GMT

@louisag wrote:

Once you are no longer earning social security points and are retired, why is there a limit on how much money you can earn without paying taxes? I think the limit is $50k.

Because the government says so (various Congresses over the decades).

If your only income is social security, it is not taxable. If you have other taxable income from any source (like a pension, investments, IRA withdrawals, gambling prizes, etc.) then you pay tax on that income and you may also pay tax on part of your social security benefits. Read more here.

https://www.irs.gov/newsroom/dont-forget-social-security-benefits-may-be-taxable

The practical dollar limit depends on your filing status and the amount of your benefit and your other income.

Re: how is social security determined?

louisag — Wed, 26 Jul 2023 18:36:45 GMT

Thank you. I didn't know social security income was taxable based on additional income.