Social Security Information & Resources For Retirees
How Does Social Security Work?
Every year that you work, you pay Social Security taxes. That tax money goes into a trust fund. The trust is used to pay benefits to people who are already retired, those with disabilities, and surviving spouses.
To become eligible for retirement benefits, you must have at least 10 years of work history. Benefits are based on your highest 35 years of earnings.
When it’s time for you to retire, your benefit is calculated like this:
First, Social Security takes your highest 35 years of earnings and adjusts the number to account for changes in wages. This is called your average indexed monthly earnings (AIME).
Next, Social Security applies a formula to your monthly average to determine your primary insurance amount (PIA).
90% of the first $1,024 of your AIME + 32% of any amount over $1,024 (up to $6,172) + 15% of any amount over $6,172 = PIA
Remember, Social Security benefits are adjusted annually for inflation. And, while you are still working, your total PIA has the potential to go up (if your monthly wages increase).
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How You Become Eligible For Benefits, by SSA