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Computing Your Social Security Monthly Benefit


When planning for Social Security retirement benefits, it is important to know how to compute the amount of your benefit at various ages.  The amount of your benefit will be different depending upon your age when you begin drawing the benefit, as well as your record of earnings over time.

Below are the factors that are needed in order to determine the amount of your Social Security benefit:

  • Your Primary Insurance Amount, or PIA
  • Your Full Retirement Age, or FRA, which is determined by your year of birth
  • Your age when you will begin drawing benefits
  • Whether or not the Windfall Elimination Provision (WEP) applies to your benefits

This earlier article has information about the PIA, and you can find your PIA on your Social Security statement.  Your FRA, if you were born between 1943 and 1954, is 66.  If you were born in 1955 or after, FRA gradually increases up to 67 by birth year of 1960 or later.

So with these first two factors, we can construct the initial part of the monthly benefit equation.  If you begin receiving benefits in the month that you reach FRA, your benefit is equal to your PIA (although this could be reduced by WEP if it applies, see below).  If you are intending to begin benefits before FRA, there will be a reduction from your PIA.  On the other hand, if you begin benefits after FRA, the amount of your benefit will be increased from your PIA.

Prior to FRA

If starting to receive benefits prior to FRA, you need to calculate the number of months prior to FRA that you’ll begin.  If it’s less than 36 months prior to FRA, take the number of months times 5/9 of a percent.  This will give you the amount of reduction.  For example, if you were starting your benefit 24 months before FRA, the calculation is:

24 * 5/9% = 120/9% = 13 3/9%, or 13.333%

If, on the other hand, you are starting your benefit more than 36 months prior to FRA, the calculation becomes more complicated.  For every month greater than 36 prior to FRA, you multiply by 5/12 of a percent, and then add 20% (36 * 5/9%) to that figure to come up with the total reduction.  So, for example, if you were starting your benefit 43 months before FRA, the calculation goes as follows:

43 minus 36 = 7

7 * 5/12% = 35/12% = 2 11/12%, or 2.9167%

20% plus 2.9167% = 22.9167%

Both of these factors are reductions, so you will subtract the factor from 100%, and multiply this by your PIA to come up with your monthly benefit amount.  From the first example, if your PIA was $2,000, the reduced benefit amount would work out to $1,733, since 100% minus 13.333% equals 86.667%.  Multiplying $2,000 by 86.667% equals $1,733.

For the second example, again using a $2,000 PIA, your benefit would be calculated as follows: 100% minus 22.9167% equals 77.0833%, times $2,000 equals $1,542.

This is your monthly benefit amount if you start benefits before FRA and the WEP doesn’t apply.  If the WEP applies to you, skip down to the section on the Windfall Elimination Provision.

After FRA

Much like the calculation for starting benefits before FRA, the calculation for starting benefits after FRA is based upon the number of months relative to FRA.  So you need to figure out how many months after FRA you are intending to begin your benefit.  For each month after FRA to the start of your benefits, up to age 70, your benefit is increased by 2/3 of a percent from your PIA. (This factor has been different in past years, but for now this is the applicable figure.)

If you wait until two and a half years after FRA to begin your benefits, this is equal to 30 months.  So the calculation for the increase is as follows:

30 * 2/3% = 60/3% = 20%

Since this is an increase over PIA, add the factor to 100%, and multiply by your PIA to come up with the monthly benefit amount.  From our example earlier, your PIA is $2,000, and you have delayed 30 months (2 1/2 years) after FRA to begin your benefit.  Multiply $2,000 by 120%, and you come up with a benefit amount of $2,400.

This is your monthly benefit amount if you have delayed receiving your benefit after FRA, unless the Windfall Elimination Provision (WEP) applies.  Keep reading for how the WEP can impact your benefit.

Windfall Elimination Provision (WEP)

If you are (or will be) receiving a pension from a job that was not covered by Social Security (e.g., a government job or a job overseas), the Windfall Elimination Provision, or WEP, will further reduce your monthly benefit amount.  See the article at the link for how the Windfall Elimination Provision is calculated.

What is important to know is that the maximum amount that the WEP can reduce your benefit (for 2013) is $395.  So if the WEP impacts you to the maximum extent, your monthly benefit amount that we calculated earlier will be reduced by $395 in 2013 – and this figure is adjusted annually by the normal Cost-of-Living Adjustments (COLAs) that are applied each year.  See this article (at the link) for information on how the WEP can be reduced or eliminated.

So that’s it – follow the above steps and you have a good idea of what your monthly benefit amount will be.  Happy calculating!

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  1. Glenn Jeffrey says:

    So I have waited two years after my FRA to start benefits, and I am trying to determine how much to expect. I can calculate the PIA and the increase due to the deferral. But I don’t understand whether COLAs for the intervening years get included or not. Can you clarify when SSA will begin to adjust for COLAs please?

    1. jblankenship says:

      When your benefit is calculated to include delay credits, the PIA is multiplied by the delay credits, and then the intervening years’ COLAs are applied. The actual benefit amount will be whatever your benefit would have been as of January of the year when you apply (including the COLA for that year). Then in January of the following year any months after January that you applied will be added to your benefit (along with the COLA).

  2. Bill says:

    The statements from the Social Security Administration always assume there will be no inflation in the future, so they do not include the effect of COLAs. But how likely is that? The benefit calculation certainly should include the COLAs. You can think of them being a part of the calculation of the PIA, or as a part of the calculation of monthly benefit. Regardless, every COLA which occurs in or after the year you turn 62 is included in the monthly benefit. See POMS 605.015(B)(e).

    1. jblankenship says:

      The problem is knowing what the COLAs will be in the future! The SSA doesn’t assume zero inflation, they just don’t take a guess at it. Can you imagine the firestorm that would cause, if projected benefits included a guess at the COLAs, and the real COLA was something far less? So, as with other financial calculations, without taking a guess at a COLA figure, the figures are represented in today’s dollars and the assumption is that inflation and the COLAs in the future will be correlated.


      1. Bill says:

        Jim — Good points, and I agree with them about projecting forward. But how about calculations based on the past? If you are now FRA, PIA was calculated back when you were 62; your actual benefit has four known COLAs included in it. Its not just the original PIA amount. Everyone seems to know that once benefits have started, they are adjusted annually by the COLA. But articles about the calculation don’t mention inclusion of COLAs prior to the start of benefits.

        The specific problem I have seen is with cash flow projections that assume a non-zero inflation rate. Including the inflation rate is important when you include a fixed pension (without any COLA) in the net worth projection, as the “real” value of the pension decreases with time. Example: FRA 66, PIA $2,000/mo, assume inflation 3%, and the fixed pension. I want to compare projected net worth with various dates for starting benefits. It makes a significant difference whether the benefit at age 70 is 2640 (2000*1.32 without the COLAs) or whether the benefit at age 70 is 3344 (2000*1.32*1.03^8 with COLAs).

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