I can't begin to tell you how many times I receive an email where someone is concerned about their Social Security benefit being wrong.
They look at their statement and see that they'll receive say $2,000 at FRA but when they calculate the numbers themselves they don't come up with anything close to that.
Then they'll see Youtube videos and other blog posts saying "Your Social Security statement is WRONG!!!" And without understanding they'll simply believe what they see, hear or read.
This is not good because it leads people to stay in their crappy, old job for many more years than they should, solely due to ignorance.
So, let's look at how Social Security benefits are actually calculated. I've talked a million times to Sunday on the AIME (Averaged Indexed Monthly Earnings) numbers.
You take your top 35 years of earnings, INFLATE THEM as per Social Security's guidelines) add them up, and divide by 420. That is your AIME.
But your AIME is NOT your benefit amount. Your benefit amount is your PIA, which is a fraction of your AIME.
To figure your PIA you take your first $895 of AIME and times by .90.
You take the next amount, up to $5397 and times that by .32.
Any amount above $5397 times by .15 and that is your PIA, the amount you'll receive at your FULL RETIREMENT AGE.
So, let's say you're looking at your statement and see you only made $16k in 1984. You're like "Oh no. My benefit is going to be small because I wasn't make very much back then."
You'd be wrong! That $16k is the same as $50 in 2017. If you made nothing but the average wage, $50k in 2017 numbers, your benefit would be $1950 at your Full Retirement Age.
Not too shabby if I do say so myself. Especially if you have NO DEBT!
https://www.ssa.gov/oact/COLA/AWI.html
https://en.wikipedia.org/wiki/Average_Indexed_Monthly_Earnings
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