How Social Security Benefits Are Calculated (2026 Guide)
Learn exactly how Social Security retirement benefits are calculated. Understand AIME, PIA, bend points, claiming age adjustments, spousal benefits, and the earnings test with 2026 numbers.
1. The Benefit Formula (AIME and PIA)
Social Security uses a two-step process to calculate your benefit:
Step 1: Calculate AIME (Average Indexed Monthly Earnings)
- 1. Take your earnings from every year you worked
- 2. Index (adjust for inflation) each year's earnings to current dollars
- 3. Select the 35 highest years
- 4. Add them up and divide by 420 (35 years x 12 months)
- 5. Result = your AIME
If you worked fewer than 35 years, zeros fill the remaining years, dragging down your average.
Step 2: Apply the PIA Formula (2026 Bend Points)
PIA = 90% x first $1,286 of AIME
+ 32% x AIME from $1,286 to $7,749
+ 15% x AIME above $7,749
The PIA is your monthly benefit at Full Retirement Age. The formula is progressive. Low earners replace a higher percentage of their income (up to 90%) while high earners replace less (down to 15% on top earnings).
2. Claiming Age: 62 vs 67 vs 70
When you claim determines your permanent monthly benefit:
| Age | % of PIA | Impact |
|---|---|---|
| 62 | 70% | 30% permanent reduction |
| 63 | 75% | 25% reduction |
| 64 | 80% | 20% reduction |
| 65 | 86.7% | 13.3% reduction |
| 66 | 93.3% | 6.7% reduction |
| 67 (FRA) | 100% | Full benefit |
| 68 | 108% | 8% delayed credits |
| 69 | 116% | 16% delayed credits |
| 70 | 124% | Maximum (24% increase) |
The Break-Even Point
Claiming at 62 gives you more checks but smaller ones. Claiming at 70 gives fewer but larger checks. The break-even point (where total lifetime benefits are equal) is typically around age 80-82. If you live past 82, waiting to 70 pays more total. About 50% of 65-year-olds will live past 82.
3. Spousal and Survivor Benefits
Spousal Benefits
- Up to 50% of higher earner's PIA
- Available at age 62 (reduced)
- No delayed credits past FRA
- Higher earner must be collecting
- You get whichever is higher: your own or spousal
Survivor Benefits
- 100% of deceased spouse's benefit at FRA
- 71.5% if claimed at age 60 (earliest)
- Disabled survivors: age 50
- Must have been married 9+ months
- Remarriage before 60 disqualifies
4. Working While Collecting (Earnings Test)
If you claim before FRA and keep working, some benefits may be temporarily withheld:
| Situation | 2026 Exempt Amount | Withholding |
|---|---|---|
| Under FRA all year | $24,480/yr | $1 per $2 over limit |
| Year you reach FRA | $65,160/yr | $1 per $3 over limit |
| At FRA and after | No limit | No withholding |
Key: Withheld benefits are not lost. SSA recalculates your benefit at FRA to credit you for months of withholding. Only earned income counts (not investments, pensions, or rental income).
5. Key 2026 Numbers
COLA
2.8%
Wage Base
$184,500
Bend Points
$1,286 / $7,749
Max at 62
$2,969/mo
Max at FRA
$4,152/mo
Max at 70
$5,181/mo
Avg Benefit
$2,071/mo
Earnings Test (under FRA)
$24,480/yr
Earnings Test (FRA year)
$65,160/yr
6. Real-World Examples
Example 1: Average earner, 35 years, claiming at 67
- Average annual earnings: $60,000
- AIME: $60,000 x 35 / 420 = $5,000
- PIA: 90% x $1,286 + 32% x ($5,000 - $1,286) = $1,157 + $1,188 = $2,345
- Claiming at FRA (67): $2,345/month
- At 62: $2,345 x 70% = $1,642/month
- At 70: $2,345 x 124% = $2,908/month
Example 2: High earner, 35 years, claiming at 70
- Average annual earnings: $150,000 (capped at wage base)
- AIME: $150,000 x 35 / 420 = $12,500
- PIA: 90% x $1,286 + 32% x $6,463 + 15% x $4,751 = $1,157 + $2,068 + $713 = $3,938
- Claiming at 70 (124%): $4,883/month = $58,596/year (tax-advantaged)
Example 3: 25 years worked (10 zero years)
- Average annual earnings: $50,000, but only 25 years
- AIME: $50,000 x 25 / 420 = $2,976 (10 zero years drag it down)
- vs. 35 years: $50,000 x 35 / 420 = $4,167
- PIA at 25 years: $1,157 + 32% x $1,690 = $1,698
- PIA at 35 years: $1,157 + 32% x $2,881 = $2,079
- 10 missing years cost $381/month ($4,572/year) for life
The Bottom Line
Your Social Security benefit is driven by three factors: how much you earned (35 best years), how long you worked (fewer than 35 years hurts), and when you claim (62 = 30% less, 70 = 24% more). The decision of when to claim is one of the most consequential financial decisions most Americans make.
Use our Social Security Calculator for a personalized estimate, then create a my Social Security account at ssa.gov for exact numbers based on your complete earnings record.
Disclaimer: This is a simplified estimate. Actual benefits depend on your complete year-by-year earnings history with inflation indexing. For exact numbers, use SSA.gov's official calculator with your real earnings record.
Frequently Asked Questions
How much Social Security will I get?
It depends on your 35 highest-earning years and when you claim. The average benefit in 2026 is $2,071/month. The maximum at age 62 is $2,969, at FRA (67) is $4,152, and at 70 is $5,181. Use our calculator for a personalized estimate based on your earnings and claiming age.
Should I claim Social Security at 62 or wait?
Claiming at 62 locks in a 30% permanent reduction (if your FRA is 67). Waiting until 70 gives you 124% of your full benefit. The break-even point is typically around age 80 -- if you live past 80, waiting pays more in total. If you need the income or have health concerns, claiming early may make sense.
What are the 2026 Social Security bend points?
The 2026 bend points are $1,286 and $7,749. The PIA formula applies 90% to AIME up to $1,286, 32% from $1,286 to $7,749, and 15% above $7,749. These are fixed at the year you turn 62 and increase annually with average wage growth.
Does working while collecting Social Security reduce my benefits?
Before FRA, yes -- if you earn over $24,480/year (2026), $1 is withheld for every $2 over. In the year you reach FRA, the limit is $65,160 with $1 per $3 over. After FRA, there's no limit. Withheld amounts aren't lost -- SSA recalculates at FRA to credit you.