Your Social Security Benefit Is Unique
Unlike a one-size-fits-all pension, your Social Security retirement benefit is calculated based on your unique earnings history. While knowing the average benefit provides a helpful benchmark, your personal payment could be significantly higher or lower. The maximum possible benefit is reserved for a select few who consistently earned the maximum taxable income over 35 years and delayed claiming until age 70. For everyone else, the amount is a personalized calculation that weighs several key factors.
How Your Benefit Is Calculated
The Social Security Administration (SSA) uses a formula based on your lifetime earnings to determine your monthly payment. This process involves a few important steps:
- Average Indexed Monthly Earnings (AIME): The SSA first looks at your entire work history to find your 35 highest-earning years. The earnings for each year are indexed to account for changes in average wages over time, ensuring past earnings reflect today's value. If you have worked fewer than 35 years, zero-earning years will be factored into the calculation, which will lower your overall average. The total of these 35 years is then divided by 420 (the number of months in 35 years) to get your Average Indexed Monthly Earnings, or AIME.
- Primary Insurance Amount (PIA): Your AIME is then used to determine your Primary Insurance Amount (PIA), which is the benefit you would receive if you start collecting at your full retirement age (FRA). The PIA is calculated using 'bend points'—income thresholds that determine the percentage of your AIME you receive. For example, in 2025, a worker's PIA is the sum of:
- 90% of the first $1,226 of AIME
- 32% of AIME between $1,226 and $7,391
- 15% of AIME over $7,391
The Impact of Your Claiming Age
Your age when you file for Social Security is one of the most critical factors influencing your monthly payment. While you can begin receiving benefits as early as age 62, waiting longer can substantially increase your monthly check.
- Early Retirement (Age 62): Claiming at the earliest possible age results in a permanently reduced monthly benefit. The reduction can be as much as 30% if your full retirement age is 67. While you receive benefits for more years, the smaller monthly amount can result in a lower total lifetime payout, especially if you live a long life.
- Full Retirement Age (FRA): This is the age at which you are entitled to your full PIA. For anyone born in 1960 or later, FRA is 67. Claiming at this age means you receive 100% of the benefit calculated from your earnings history.
- Delayed Retirement (Up to Age 70): The SSA provides delayed retirement credits for each month you wait to claim benefits after your FRA, up to age 70. These credits can boost your monthly payment by about 8% for each year you wait. For someone with an FRA of 67, waiting until age 70 can result in a monthly payment that is 24% higher than their PIA.
Comparison of Maximum Monthly Benefits by Claiming Age
For workers retiring in 2025 who consistently earned the maximum taxable income throughout their careers, the monthly benefit can vary significantly depending on when they claim.
| Retirement Age | Maximum Monthly Benefit in 2025 |
|---|---|
| Age 62 | $2,831 |
| Age 67 (FRA for 1960+) | $4,018 |
| Age 70 | $5,108 |
What About Working While Receiving Benefits?
If you retire before your full retirement age and continue to work, your earnings can temporarily reduce your Social Security benefits. However, this is not a permanent reduction.
- Before FRA: If you are younger than your FRA, $1 in benefits is deducted for every $2 you earn above the annual earnings limit ($23,400 in 2025).
- In the Year You Reach FRA: In the months leading up to your birthday month, the earnings limit is higher ($62,160 in 2025), and the deduction is $1 for every $3 you earn above the limit.
- After FRA: Starting with the month you reach your FRA, there are no limits on what you can earn, and your benefits will not be reduced, no matter your income. The SSA will also recalculate your benefit at this time, giving you credit for any benefits that were previously withheld.
Cost-of-Living Adjustments (COLA)
To ensure benefits keep up with inflation, the SSA provides an annual Cost-of-Living Adjustment (COLA). The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and is applied automatically to your monthly payment. For 2025, the COLA was 2.5%, which meant an increase for all Social Security and SSI beneficiaries.
The Bottom Line
Understanding how much money a retired person gets from Social Security requires a look beyond the average. Your specific amount is a product of your individual work history, earning levels over 35 years, and, most importantly, the age at which you choose to begin receiving payments. By strategically planning your claiming age and understanding how other factors like working in retirement and COLA affect your benefits, you can make an informed decision that helps maximize your financial security in retirement.
For a personalized estimate of your potential benefits, you can create a free account and use the tools on the Social Security Administration's official website. Find your personal estimate on the SSA website
