What Social Security Wages Are Used?
Your lifetime earnings are used to calculate your benefit amount. Each year of earnings is recorded in the Social Security system. Your actual earnings are adjusted to account for changes in average wages since your wages were earned – that is, they are indexed. For example,
- $24,000 earned in 1997 x (change rate since 1997 to calculated year) = adjusted wage
If you want to calculate your average indexed monthly income, you’ll need up to 35 years of earnings. After the Social Security Office determines how many years you’ve earned wages, they will:
- Select the years with the highest earnings
- Sum the indexed earnings and divide the total amount by the total number of months in those years
- Round the average amount down to the nearest dollar
And there you have it – your average indexed monthly income.