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Not Thinking About Retirement Planning? You Should Be! Here's How Your Retirement Benefit Will Be Calculated

March 26, 2016 by Robert L. Heller

Are you planning for retirement? Or are you not thinking about it since you have some years to go? You should be thinking about it! If your employer withholds and pays Social Security payroll taxes on your behalf, you should understand this benefit for future retirement planning.

How is your benefit calculated? Social Security takes your 35 highest-earning years into account when computing your benefits. Each year’s income—up to the maximum taxable Social Security wages—is indexed for inflation and averaged together. A formula is then applied to arrive at your full Social Security benefit—that is, the monthly amount you are entitled to if you retire at your full retirement age.

How your retirement benefit is calculated

Here is how your 2016 retirement benefit is calculated: 90% of the first $856, 32% of the amount between $856 and $5,157, and 15% of the amount above $5,157. Not a math wiz? Then go to and create a mySocialSecurity account so you can log in and check your earnings to date. You can also calculate your retirement benefit using the benefit calculator.

Before you can receive Social Security benefits, you need to be eligible. You must earn 40 “credits” during your working lifetime. Each $1,260 in earnings you have in 2016 will give you one credit, up to a maximum of four per year. The earnings amount is adjusted each year. Again, you should check your Social Security earnings information regularly to be sure your employer reports your earnings correctly.

When you file for retirement affects how much of your retirement benefit you will receive. Social Security allows for early retirement beginning at age 62, full retirement at an age determined by your birth year and deferred retirement to age 70.

  • 62 = 75% of retirement benefit
  • 66 = 100% of retirement benefit
  • 68 = 118% of retirement benefit
  • 70 = 132% of retirement benefit

Your full retirement age

If born in: your full retirement age is:

  • 1943-1954  – 66 years
  • 1955 – 66 years, 2 months
  • 1956 – 66 years, 4 months
  • 1957 – 66 years, 6 months
  • 1958 – 66 years, 8 months
  • 1959 – 66 years, 10 months
  • 1960 or later 67 years

How to file for Social Security benefits

You can file for Social Security benefits online at By now you should be familiar with this website, as it is your access to all of your Social Security information. If you are not already, become familiar with this website! You can also get information on spousal and survivor’s benefits there.

Working while collecting benefits

You can work while collecting Social Security benefits, but there are three categories you should be aware of:

  1. Those who retire prior to their full retirement age can make up to $15,720 in exempt earnings. Beyond that amount, every $2 in earnings will reduce Social Security by $1.
  2. If you retire in the year you will attain full retirement age, for 2016 the first $41,880 is exempt and the reduction is just $1 for every $3 in earnings beyond that, plus only the months before your full retirement age birthday count toward the total.
  3. Social Security recipients who work past full retirement age will experience no benefit reduction, no matter how much they earn.

Most of your Social Security benefit questions can be answered online, but don’t wait until you have decided to retire. Check out your information early and often as you progress through your working years. And then you can enjoy the fruits of your labor knowing you are getting all that you’ve earned.

About the Author

Robert L. Heller
Robert L. Heller has practiced law in Ohio for nearly 40 years, devoting his entire career to helping disabled people in the Mahoning Valley to pursue needed benefits. A native of Warren, Ohio, Robert earned his undergraduate degree from Miami University of Ohio and his law degree from the University of Toledo College of Law. He also studied public administration at American University in Washington, D.C. He is admitted to practice in Ohio state courts, U.S. District Court for the Northern District of Ohio and Sixth Circuit U.S. Court of Appeals as well as a member of the National Organization of Social Security Claimant Representatives (NOSSCR).

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