Many of us know that we could receive Social Security benefits after retirement. But how much we can get is different. It depends on our working history. But how exactly the SSR calculates the social security benefits?

We all know that social security benefits are calculated on the basis of our work history, which includes how many years we work, how much annual income we have and when we decide to claim the benefits.

How many years we work

A person needs to have at least 40 work credits to qualify for social security. These credits are based on earned income. In 2020, one credit equals each $1,410 in earnings subject to payroll taxes. Therefore, the more you earn, the more credits you can have. Most people will have 40 credits in 10 years.

How much annual income we have

10 years work only meets the minimum requirement of social security. SSA will then calculate how much it will pay you depending on your 35 highest-earning years. After adjust your income for inflation, SSA adds up your total income from 35 highest-earning years and divides the sum by 420 (the number of month in 35 years), this is the amount they will pay you after you retire. If you work less than 35 years, SSA will add zero to your total earning, which will significantly reduce your monthly payments.

When we decide to claim the benefits

The earliest age you can claim your social security is 62. However, you’ll be paid less when you claim at your full retiremnet age, which is 67. If you wait until 70, there’ll be bonus on your monthly payment. Basically, the longer you wait, the more you’ll have.

That’s how SSA calculates your social security benefits. If you want to have as much social security benefits as possible, you have to work for long period of time and try to get more annual income and wait patiently.

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