• How much time do you work?
• How much money do you make each year?
• Inflation
• When do you start receiving benefits?

See how these factors impact your payments and how the Social Security Administration calculates its estimates.

How Is Social Security Determination Made?

The amount of Social Security payments you will receive is calculated in three steps.

Step 1: Determine your Average Indexed Monthly Earnings using your earnings history (AIME).
Step 2: Determine your primary insurance amount using your AIME (PIA).
Step 3: Update your PIA to reflect the age at which you will begin receiving benefits.

You can utilize a copy of your Social Security statement, which includes your salary history, to enter your own figures into the calculations below.

Step 1: Determine Your Monthly Earnings

Your Social Security Calculator first determines how long you worked and how much you earned each year. It is used to determine your AIME. Here's how:
List your earnings for each year.
Your Social Security Statement has your complete earnings history that is available online.

Inflation should be considered

To determine how to adjust your earnings history for inflation, Social Security employs a process known as "wage indexing." Each year, Social Security publishes the national average wages for the year. This published list may be found on the National Average Wage Index website. The longest average of 35 years

The Social Security calculator computes your average monthly earnings based on your highest 35 years of earnings. If you do not have 35 years of earnings, the algorithm will use a zero, lowering the average.  When you go to the Social Security Calculator, include the highest 35 years of indexed earnings and divide by 420, the number of months in a 35-year work history, to get the Average Indexed Monthly Earnings.

Step 2: Determine Your PIA (Primary Insurance Amount) (PIA)

After calculating your average indexed monthly earnings (AIME), you'll enter that figure into a formula to calculate your primary insurance amount or PIA. This equation

Your pay is indexed to the national average wage for the year you turn 60. You multiply your included earnings by the average wage of your indexing year (which is the year you turn 60) divided by the average wage of the years you are indexing.
is based on something called "bend points."

Step 3: Modify Your PIA for the Age at Which You Will Begin Receiving Benefits

The eventual amount of your Social Security retirement payment is determined by the age at which you begin receiving benefits.

The earliest you can begin receiving retirement benefits is at the age of 62 (or 60 if you are eligible for a widow or widower's benefit on the record of a deceased spouse or ex-spouse). You will receive greater benefits if you wait until a later age—as late as age 70—to begin earning benefits.

How Do You Work Out Social Security Taxes?

The term "Social Security taxes" can apply to both taxes paid into the system and taxes paid on Social Security payments. The payroll tax, which is 6.2% for workers and 12.4% for self-employed persons, is used to support Social Security. 

You will still have to pay income taxes while collecting Social Security benefits, but you will not have to pay taxes on all of your benefits. Individuals with a total yearly income of more than $34,000 ($44,000 for joint filers) will pay income tax on up to 85% of their Social Security payments. Alternatively, those with salaries ranging from $25,000 to $34,000 may be required to pay income tax on up to 50% of their Social Security payments.

Allcalculator.net provides a comprehensive step-by-step guide to calculating your Social Security benefits, ensuring you have a clear understanding of the process and can make informed decisions about your retirement income.