How Are Social Security Retirement Benefits Calculated

A common question most people facing retirement ask is “How much will my social security benefits be?” Social Security Retirement Benefits or SSRB depends on how much you’ve earned and when you decide to start collecting. While the amount of your lifetime earnings affects your SSRB, the age you choose to collect also has a large impact on your benefits. For example, even if you had higher lifetime earnings, your benefits may not be maximized if collected before your full retirement age. Here are the full retirement ages by birth year:

Year Of Birth Full Retirement Age
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960s and later 67

Note that people born on January 1st of any year should refer to the previous year.

After looking at the full retirement ages, you can begin to estimate your benefits.  So how are Social Security Retirement Benefits calculated? Let’s pretend you were born on January 1, 1950 and currently earn $150,000/ year. Based on the Social Security Administration’s online quick benefits calculator, you would receive the following estimated monthly benefits at the following retirement ages:

Full Retirement Age At Retirement Estimated Monthly Benefit
66 63 $1,935
66 66 $2,464 (+$529 compared to 63)
66 70 $3,322 (+$858 compared to 66)

Ignoring personal reasons for retiring and based on a purely mathematical analysis, you can determine at which age to collect benefits so that you can maximize your greatest total lifetime benefits. Using an estimated life expectancy of 84, as well as a contingent early death at age 75, the difference in total lifetime benefits may be computed as follows:

Age At Retirement Estimated Monthly Benefit Years Collecting Benefits Total Lifetime Benefits
63 $1,935 21 (assumes death at 84) $487,620
66 $2,464 18 (assumes death at 84) $532,224
70 $3,322 12 (assumes death at 84) $558,096
63 $1,935 12 (assumes death at 75) $278,640
66 $2,464 9 (assumes death at 75) $266,112
70 $3,322 5 (assumes death at 75) $199,320

As you can see, the amount of total lifetime benefits are influenced by uncontrollable factors, such as life expectancy. However, the later you choose to collect benefits, the higher your Monthly Estimated Benefits are. So the answer to “How much will my social security benefits be?” depends on your own unique situation: estimated life expectancy, age, health, retirement needs, and other personal factors. Perhaps both your parents lived until 98 and you are still healthy; you may want to start collecting benefits at 70 for higher lifetime benefits.

Having sufficient retirement funds from other sources, such as a 401(k) plan, IRA, or the cash value from a whole life insurance policy, could make the decision to delay receiving benefits easier and provide a more financially comprehensive retirement plan. Sit down with a Truvium Financial Representative and begin looking at your financial situation with a macromanager based approach to find inefficiencies in the products and strategies you have implemented. If you start planning ahead now, you can get on track to financial security in your retirement years and achieve financial independence, purpose, and balance.

About Jeffery Kronenberg

Jeffrey Kronenberg started his career in 2004 with the National Financial Network located in New York, NY. In just a few short years, Jeff developed a great deal of knowledge in macroeconomic planning for clients with a focus on executives, business owners, and high net-worth individuals and their families. Jeff's ability to simplify very complex financial matters helped to give clients the solutions they were looking for. He also spent time utilizing this process while simultaneously helping to manage a thriving asset management practice with over $500,000,000 in assets. In 2012, Jeff completed the LEAP Masters Course to take his expertise in the macroeconomic planning process to one of the highest levels in the country.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: . 25 Carle Rd., Suite 200, Westbury, NY 11590, (516)334-4900. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Truvium Financial Group is not an affiliate or subsidiary of PAS or Guardian.

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1. Source: SSA Publication No. 05-10035, ICN 457500, July 2012 (

2. The maximum amount of wages subject to Social Security taxes is $118,500 for 2015. Wages above the maximum amount are not subject to Social Security taxes. The wage limit does not apply to Medicare’s Hospital Insurance tax.

3. These are hypothetical benefit amounts based on inputs to the U.S. Social Security Administration’s online quick calculator ( quickcalc/index.html). These do not represent any particular person’s retirement benefits and are used for illustration purposes only. The amounts were calculated on November 16, 2012 and are subject to change

Contact the Social Security Administration for complete details regarding eligibility for benefits. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.

2016-25937 (exp. 07/18)