Calculating Your Benefits

The Social Security retirement system is governed by many complicated rules that can make computing your benefits a test of mathematical acumen. What are the rules that come into play when determining how much you’re due at retirement?

* Retirement benefits are computed based on your “average” monthly earnings over 35 years of work. (Earnings from early years are adjusted for inflation.) You get 90% of the first $437 in average monthly wages, 32% of the next $2,198 in monthly wages and 15% of monthly wages in excess of those amounts, up to set limits. To get an estimate of your monthly Social Security benefits when retired or disabled, call (800) 772-1213 or sign on to the agency’s Web site at https://www.ssa.gov

* If you earn more than certain threshold amounts after retirement, your monthly Social Security benefits are reduced by $1 for every $3 in earnings above the threshold. These thresholds were recently boosted. In 1996, the threshold is $12,500; in 1997, it will be $13,500; in 1998, $14,500; in 1999, $15,500. By 2002, it will jump to $30,000.

* If you earn too much to retire, you may delay your date of retirement past age 65. If you do, your eventual benefits will be enriched by about 5% per year for every extra year you work.

* If you retire before your normal retirement age (usually age 65), your benefits will be reduced by about 0.56 percentage point for each month you get benefits before your normal retirement date.

* If you retire midyear, Social Security officials will look at your earnings for that year and compare them with the allowable earnings thresholds. If your earnings are below the thresholds, they’ll calculate the most advantageous month of retirement. That may be the month you retire--or it could be prior to your actual retirement. For instance, in Helen Gilbert’s case, retiring in January rather than March gave her two extra months of benefits while decreasing her monthly stipend by only 1.1 percentage points.