Social Security calculates your monthly retirement check in three moves: it averages your 35 highest-earning years after adjusting them for wage growth, runs that average through a progressive three-tier percentage formula to produce a base amount, and then adjusts that base up or down depending on the age you actually file. That base is called your Primary Insurance Amount, and for someone first eligible in 2026 the maximum at full retirement age is $4,152 per month.1Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Most people receive considerably less, and the age you claim can change the amount by as much as 30 percent down or 24 percent up, for life.
Do You Qualify in the First Place
You need 40 work credits to draw a retirement benefit, which is roughly ten years of covered employment.2Social Security Administration. How You Earn Credits In 2026, every $1,890 in covered earnings buys one credit, up to four credits per year at $7,560.3Social Security Administration. Social Security Credits The credits don’t have to be consecutive. Once you hit 40, the formula below is what determines your check.
Step One: Your Average Indexed Monthly Earnings
The Social Security Administration doesn’t add up your paychecks at face value. It indexes each year of past earnings to national wage growth, so a salary earned in 1990 is scaled up to be comparable to today’s wages. Indexing applies through the year you turn 60; earnings after that go into the formula at their actual dollar amount.4Office of the Law Revision Counsel. 42 USC 415 – Computation of Primary Insurance Amount
From your entire work history, the agency selects the 35 highest indexed years. Fewer than 35 years of covered work? Zeros fill the gaps, and those zeros pull your average down hard. Someone with 30 strong years and five zeros ends up with a noticeably smaller benefit than someone who worked the full 35.
There’s also a ceiling on how much of any year’s income counts. For 2026, only the first $184,500 of earnings is subject to Social Security tax and included in the calculation.1Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Anything above the cap is invisible to the benefit formula. The cap itself moves each year with national wage trends.5Social Security Administration. Contribution and Benefit Base
Add up those top 35 indexed years, divide by 420 months, and the result is your Average Indexed Monthly Earnings, or AIME. It’s essentially your inflation-adjusted average monthly salary across your best-earning decades. Mistakes at this stage carry all the way through, so it’s worth checking your earnings record through a my Social Security account to make sure every year of taxed income is on it.
Step Two: The Three-Tier PIA Formula
Your AIME goes into a progressive formula that replaces a larger share of income for lower earners and a smaller share for higher earners. The break points between tiers, called bend points, are updated each year for wage growth. For anyone first eligible in 2026 (turning 62, becoming disabled, or dying this year), the formula is:6Social Security Administration. Primary Insurance Amount
- 90 percent of the first $1,286 of your AIME
- 32 percent of the amount between $1,286 and $7,749
- 15 percent of anything above $7,749
The three pieces get added and rounded down to the nearest ten cents.7Social Security Administration. Benefit Formula Bend Points That total is your Primary Insurance Amount, or PIA: what you’d get monthly if you filed exactly at full retirement age.
A worked example. If your AIME is $6,000, the math is (0.90 × $1,286) + (0.32 × $4,714) = $1,157.40 + $1,508.48 = $2,665.80. A higher earner with an AIME of $12,000 uses all three tiers: (0.90 × $1,286) + (0.32 × $6,463) + (0.15 × $4,251) = $1,157.40 + $2,068.16 + $637.65 = $3,863.20.
Notice what the 90 percent first tier does. It replaces almost all of a low earner’s average income, while a high earner’s benefit replaces a much smaller share of their working pay. Social Security was designed as a floor, not a full income replacement, and this formula is where that policy shows up in dollars.
Step Three: How the Age You File Changes the Number
Your PIA assumes you file at full retirement age, which is 67 for anyone born in 1960 or later.8Social Security Administration. Benefits Planner – Retirement – Born in 1960 or Later File earlier and the check is smaller for life. File later and it’s larger for life. These adjustments are permanent.
Filing Before Full Retirement Age
You can start as early as 62. For the first 36 months of early filing, your benefit drops by five-ninths of one percent per month. For each additional month beyond 36, the reduction is five-twelfths of one percent.9Office of the Law Revision Counsel. 42 USC 402 – Old-Age and Survivors Insurance Benefit Payments Claiming at 62 with a full retirement age of 67 means 60 months early, a 30 percent cut. A $2,500 PIA becomes $1,750, and stays there.
Delaying Past Full Retirement Age
Wait past 67 and you earn delayed retirement credits of two-thirds of one percent per month, or 8 percent per year.9Office of the Law Revision Counsel. 42 USC 402 – Old-Age and Survivors Insurance Benefit Payments Credits stop accruing at 70, so the maximum boost is 24 percent. That same $2,500 PIA grows to $3,100 at 70.10Social Security Administration. Delayed Retirement – Born in 1960
Cost-of-Living Adjustments After You Start
Your benefit isn’t frozen once it’s set. Each year, Social Security applies a cost-of-living adjustment based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers, comparing the third-quarter average against the third quarter of the last year a COLA took effect. If prices rose, benefits rise by the same percentage, rounded to the nearest tenth. If prices didn’t rise, benefits hold flat. They don’t fall.11Social Security Administration. Latest Cost-of-Living Adjustment
The 2026 COLA is 2.8 percent.12Social Security Administration. Cost-of-Living Adjustment (COLA) Information Small annual increases compound over 20 or 30 years of retirement, and they apply to whatever benefit you actually receive, including reductions for early filing. People who delay filing don’t miss COLAs; the adjustments are built into the PIA before delayed retirement credits are added.
If You Keep Working While Collecting Early
Claiming before full retirement age while still working triggers the retirement earnings test, which can temporarily withhold part of your benefit. In 2026:13Social Security Administration. Exempt Amounts Under the Earnings Test
- If you’re under full retirement age the entire year, Social Security withholds $1 for every $2 you earn above $24,480.
- If you reach full retirement age during 2026, Social Security withholds $1 for every $3 you earn above $65,160, counting only earnings in the months before you hit full retirement age.
Once you reach full retirement age, the earnings test ends. You can earn any amount with no reduction.1Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet The withheld money isn’t gone, either. When you reach full retirement age, Social Security recalculates your monthly amount upward to credit back the months when benefits were withheld, so over a full retirement you generally recover it.
What the IRS Takes
The benefit the formula gives you isn’t necessarily what lands in your account after taxes. Whether your Social Security is federally taxed depends on your combined income: adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits.14Social Security Administration. Must I Pay Taxes on Social Security Benefits? The thresholds haven’t been indexed to inflation since the 1980s and 1990s, so more retirees cross them every year:15Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
- Single filers with combined income between $25,000 and $34,000, or joint filers between $32,000 and $44,000: up to 50 percent of benefits may be taxable.
- Single filers above $34,000, or joint filers above $44,000: up to 85 percent of benefits may be taxable.
“Up to 85 percent taxable” is often misread. It doesn’t mean the IRS takes 85 percent of your check. It means as much as 85 percent of the benefit amount is added to your taxable income, and you pay your ordinary tax rate on that portion. No one is taxed on more than 85 percent of benefits, regardless of income. Below $25,000 (single) or $32,000 (joint) combined income, benefits aren’t federally taxed at all.