How are my Social Security benefit amounts calculated?

Do you often question just how your Social Security benefits are calculated? You’re not alone! I’m sure most people assume they just pick numbers out of a hat – and I’m convinced that my idea is not too far off!

The Social Security Administration tells that the calculations to determine how much you are entitled to are, and I quote, “complicated.” And we trust these people with our money…why? They say that the amount of your benefits are determined by an elaborate formula based entirely on the raw mean (average) of the yearly earnings that you reported from the time you began working.

Just in case this is not difficult enough to understand, the SSA claims that they calculate your average earnings on a different scale based on your age. If you turn 62, or should you have become disabled on or before 12/31/1978, then the Social Security Administration averages the dollar value of your previous earnings, and then bases the value of the monthly benefits that you are awarded on this amount.

Now, should you reach age 62 or become disabled any time after 1/1/1979, then the SSA divides your earnings up into two specific categories. These categories are determined by the year you earned your wages that you are looking to claim on. The first category includes all wages that you earned before 1951. These wages are credited with the true dollar value up to a certain amount per year. The second category includes all wages earned from the year 1951 on. These years have annual limits placed on earning credits – regardless of how much you have acquired during this time.

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August 26, 2008 | Filed Under Social Security Benefits, Social Security Disability 

Comments

2 Responses to “How are my Social Security benefit amounts calculated?”

  1. Rita Bourne on March 2nd, 2009 2:00 pm

    I am trying to decide if I should apply now or wait until I turn 66. What is the difference in the payment? ( I will turn 66 in September)

  2. Alla Gelman on April 14th, 2009 1:15 pm

    My husband is diagnosed with pancreatic cancer.
    He has difficulty working and i would like to know if he can collect a full amount of social security before age 66.He is 62 now.
    What is compassionate allowance and what is the dollar amount of it?
    His cancer is on the list-pancreatic cancer.
    Could someone please advice me?
    Thank you,
    Alla Gelman

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