How much Social Security might you Receive when you Retire?
Do you have any idea of how your social security benefits will be calculated?
by Teena A. Takata

Figuring out who is covered and what eligible wages are is fairly complex.  The best source for an accurate estimate of your social security benefits is to get a Social Security Statement (formerly a Social Security Earnings and Benefits Statement), which is requested on Social Security Form SSA-7004.  But, some general information follows to give you an extremely rough idea of the rules.

The information provided also assumes the rules won’t change that much between now and whenever you retire, and that the Social Security System remains solvent and is able to continue to pay benefits to retired workers.  This ultimately may be a terrible assumption; but at the same time, we cannot predict the future.

Greatly over-simplifying the rule, if you work 40 years until age 62, then the 35 years with the highest earnings are considered.  Only earnings up to the social security limit for the applicable year are considered, however.  The earnings are indexed for inflation, such that older years’ wages are increased to current values after considering inflation.  The indexed earnings are averaged to determine an average indexed monthly wage.  Based on the average indexed wage, and date and age at retirement, a benefit is calculated.

Workers who earn less on the average receive a higher benefit based on the percentage paid out, compared to the average wage.  For example, persons who first collected social security in 1996 at their normal retirement age (age 65 in 1996) collected the following amounts based on the average indexed earnings.

Average Indexed                  Retirement Benefit            Benefit as a Percentage

Monthly Earnings                                                                  of Earnings

$ 100                                       $   97.20                                  97.2%

   500                                          424.60                                  84.9%

1,000                                          597.70                                  59.8%

1,500                                          770.90                                  51.4%

2,000                                          944.00                                  47.2%

3,000                                       1,183.60                                  39.4%

3,500                                       1,250.00                                  35.7%

For Retirement Benefits

Work Requirements

·          You need to work 40 quarters – for a wage earner, a quarter of coverage occurs when you have earned over $260 per quarter in 1979, gradually increasing to $640 per quarter in 1996.  A self employed person needs to earn over $100 per quarter for years before 1978, and amounts equivalent to the wage earner’s quarterly requirements for periods thereafter.

Entitlement for Spouse The spouse of the primary worker is entitled to either take a spousal benefit (of one-half the primary worker’s entitlement), or they receive their entitlement under a calculation based on their earned income. Divorced spouses who were married for over 10 years may be entitled to receive a payment based on the divorced husband’s earnings history.

Survivor Benefits A spouse who receives benefits based on the primary worker’s entitlement, who then loses the spouse, is then entitled to receive approximately 70% of the primary worker’s entitlement.

Other Types of Benefits

Young children of deceased workers and disabled persons are also entitled to receive benefit payments.  Required years of service are different, see the Social Security Administration for details.

As indicated, the Social Security Administration is the place to go for an earnings estimate for you.  On the internet, their site is at, and you can request the earnings benefit statement on the internet during daytime hours.  You can also call a local office to request that statement.  We have heard that these benefit estimate forms will start being mailed to all workers over age 25 each year, starting in October (this month).  Everyone should briefly look at the form to ensure the reported earnings look correct based on their earnings history, to find problems caused by inadvertent reporting errors where an employer erroneously reports a wrong social security number to the government.  It is interesting, and somewhat comforting, to have an idea of what amount Social Security may pay you after your working years.

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Last modified: November 08, 2002