Social Security-How much will I receive?

December 17, 2018  |  Written by Greg Forsthoefel

Social Security- How much will I receive?


As the Baby Boomers approach retirement, they inevitably ask the question: When I take Social Security, how much will I receive?  Assuming that you have a minimum of 40 quarters of wages for which FICA tax has been withheld, (or you are a self employed individual who has paid into the Social Security system in the form of Self Employment Tax) the Social Security Administration calculates the amount you will receive as follows:


  1. They determine the total wages you’ve earned in your highest 35 years of working. 
    • If you have worked fewer than 35 years then they will use your wages over the total years worked to find your total. 
    • If you’ve worked more than 35 years, they will use your total wages for highest 35 years.


  1. They then divide the total wages by 35 years to find your average monthly wage. 
    • If you have worked fewer than 35 years, they will still divide by 35. 


  1. They then adjust the average monthly wage to determine your monthly Social Security benefit at your Full Retirement Age.


The adjustment in step 3 is used to skew the average payments so as not to disadvantage lower income recipients. 

  • Example:  Let’s say that after going through steps 1 through 3, a soon to be retiree calculates the number in step 3 to be $6,000.   
  • The formula for calculating his monthly Social Security benefit based on that number is:  (90% of the first $885) + (32% of the amount between $886 and $5,336) + (15% of the amount over $5,336).
  • Or in his case, the Social Security benefit is $796.50 + $1,424.00 + $99.60 = $2,320.10


So this person would receive $2,320.10 at Full Retirement Age based on his earnings history. 

The Social Security Administration calculates your benefit for you.  You can check your benefit each year on  You must first set up and account with user name and password, (and answer a number of security questions) but once you do this you have access to your benefit, and the earnings history that the Social Security administration uses to determine your benefit.  The SSA will send you a benefit statement on major milestone birthdays (birthdays where your age ends in 0 or 5), but we suggest keeping track of it every year.


It's important to review your earnings history every year.  Sometimes, the SSA will be missing a year of data, but you know that you’ve worked.  In that case, you need to find a tax return, or W-2 for that year, then call the SSA and ask them to correct their error.  My experience is that if you can prove they made a mistake, they are happy to correct it.


Unless your income for the year is very low, your benefit will be subject to Federal Income tax.  If you’re thinking of taking Social Security, you should talk to your CPA and ask him to run a tax projection to determine how taking social security will impact your tax liability.  In addition, you should discuss your Social Security decision with your CPA or your financial advisor to determine if taking Social Security is the right choice for you.  Except in rare instances, you can’t undo your Social Security decision, so you must make sure it’s the right choice.