How to Calculate Maximum Social Security Retirement Replacement

Learn how to calculate your maximum Social Security retirement income.

Social Security is designed to be retirement insurance that you pay for during your working years. It forms a sort of "safety net," ensuring that you receive a minimum amount of money in your old age or if you cannot work. On average, according to the Social Security Administration, Social Security payments represented 36 percent of income for those 65 and older in 2007. Before you retire, you may want to know what your maximum Social Security benefit will be at various retirement ages so that you can plan your personal retirement savings accordingly.

Things You'll Need

• Social Security Statement

Instructions

Social Security Statement

1. Get a copy of your Social Security statement from the Social Security Administration. You can visit your local Social Security Administration office, or request a copy of your most recent statement through the SSA website. You will need to provide the Social Security Administration with your name, Social Security number, date of birth, place of birth, and your mother's maiden name.

2. Open the statement and look at the retirement benefit page. You will see three retirement ages: 62, which is considered early retirement; your full retirement age; and age 70.

3. Note the estimated retirement benefit listed for each age, which is figured according to your earnings record. Waiting to take Social Security until age 70 will give you the maximum monthly benefit.

Social Security Online Benefit Estimator

1. Go to the Social Security Administration's website, ssa.gov. Click on "Estimate Your Retirement Benefits" in the left column.

2. Click on the red "Estimate Your Retirement Benefits" button on the far right-hand side of the web page, below the search box.

3. Read the "Acknowledgement for Online Services," then click "I Agree."

4. Fill in the "Information We Need" form. Enter your name, Social Security number, your birthdate and birthplace, and your mother's maiden name. Click the "Continue" button on the bottom right-hand side of the page.

5. Verify your information on the new page that opens, then click "Confirm."

6. Enter your last year's wage amount at the bottom of the page and click "Create Estimate" on the right-hand side of the page. This generates your estimated Social Security benefit at ages 62, 67, and 70.

7. Click on the "Create Additional Scenarios" button at the bottom right of the page, if you want to further customize your statement.

8. Enter the age you will stop working and your estimated average annual earnings up to your "stop work" age in the appropriate boxes. Click on the "Create Scenarios" button at the bottom right of the page.

9. Enter your "stop work" age and your estimate earnings for Scenarios 2 and 3, if desired. Click the "Create Scenarios" button. Adjust the ages and amounts again, if desired, and click "Create Scenarios."

10. Click "Print/Save" if you want to keep a copy of the results, and follow the directions. Then click "Logout."

Tips & Warnings

• Annual SSA statements are typically one year behind. The online estimator can provide more up-to-date information.

References

• Social Security Administration: The Maximum Social Security Retirement Benefit
• "Practicing Financial Planning for Professionals, Practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004
• MarketWatch: Counting on Social Security? Don't

Resources

• Social Security Administration: Request a Social Security Statement
• Social Security Online: Benefits Calculators