Methodology
How SSA Plan Works
A transparent explanation of every step in our Social Security benefit calculation pipeline — from raw earnings to lifetime present value.
1. Wage Indexing
Each year of earnings is adjusted to account for general wage growth using SSA's Average Wage Index (AWI). Earnings are indexed to the year the worker turns 60. Years after age 60 are used at their nominal value. This ensures older earnings are comparable to more recent wages in today's terms.
2. Average Indexed Monthly Earnings (AIME)
From the full indexed earnings history, the highest 35 years are selected and summed. That total is divided by 420 (35 years x 12 months) to produce the AIME — a single monthly figure representing the worker's career earnings for benefit calculation purposes. If fewer than 35 years of earnings exist, zeros are used for the missing years.
3. Primary Insurance Amount (PIA)
The PIA is computed by applying SSA's three-tiered formula to the AIME using "bend points" that are fixed based on the year the worker turns 62. The formula is: 90% of the first bend point + 32% of earnings between the first and second bend points + 15% of earnings above the second bend point. The result is truncated to the nearest dime.
4. Full Retirement Age (FRA)
FRA depends on birth year. For those born 1943-1954, FRA is 66. It increases by 2 months per birth year from 1955-1959, reaching 67 for those born 1960 or later. FRA is the age at which you receive exactly your PIA with no reduction or increase.
5. Early Claiming Reduction
Claiming before FRA permanently reduces your benefit. For the first 36 months before FRA, the reduction is 5/9 of 1% per month (6.67% per year). For any additional months beyond 36, the reduction is 5/12 of 1% per month (5% per year). At age 62 with an FRA of 67, the total reduction is 30%.
6. Delayed Retirement Credits
For each month you delay claiming past FRA (up to age 70), your benefit increases by 2/3 of 1% per month (8% per year). These credits stop accumulating at age 70, so there is no advantage to claiming later than 70.
7. Cost-of-Living Adjustments (COLA)
SSA Plan applies an assumed 2.5% annual COLA, which approximates the long-term historical average. COLAs are applied beginning at age 62, regardless of when you actually claim. This means even if you delay claiming, your PIA grows with COLAs each year after 62. Benefit amounts shown in the estimator are in today's dollars (before COLA adjustments).
8. Spousal Benefits
A spouse may be eligible for up to 50% of the worker's PIA, minus their own PIA. Spousal benefits are only available once the worker has filed for their own benefits (or reached FRA). SSA Plan computes the spousal top-up amount when a spouse is linked to the client.
9. Survivor Benefits
A surviving spouse may receive the deceased worker's benefit amount, subject to the Retirement Insurance Benefit Limitation (RIB-LIM). The survivor benefit is capped at the larger of: (a) the deceased's reduced benefit, or (b) 82.5% of the deceased's PIA. SSA Plan models this when a spouse is linked.
10. Earnings Test
If you claim benefits before FRA and continue working, earnings above an annual exempt amount trigger withholding of $1 for every $2 earned over the limit. In the year you reach FRA, the threshold is higher and the withholding rate drops to $1 for every $3. After reaching FRA, there is no earnings test. Withheld benefits are not lost — SSA recalculates your benefit at FRA to credit back the withheld months.
11. Lifetime Present Value
The lifetime present value of benefits is calculated using a 3% real discount rate and SSA 2022 period life tables for mortality probability. For each year from claiming age through age 120, the annual benefit is multiplied by the probability of surviving to that age, then discounted to present value. Summing these values produces a single number representing the total expected value of benefits in today's dollars.
12. Break-Even Age
The break-even age compares cumulative benefits of one claiming age versus claiming at FRA. It answers: "At what age do total benefits received from this claiming strategy overtake what I would have received by claiming at FRA?" Break-even is calculated using today's dollars without COLA, discount rate, or mortality weighting — a simple cumulative sum comparison.
13. What We Don't Calculate
The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) were repealed effective January 2025 and are not modeled. SSA Plan does not account for potential future changes in Social Security law, changes to the retirement age, benefit formula modifications, or trust fund depletion scenarios. Disability benefits (SSDI) are not included.
All calculations are based on publicly available SSA formulas, published bend points, COLA history, average wage indexes, and actuarial life tables. SSA Plan is independently developed and is not affiliated with, endorsed by, or connected to the Social Security Administration or any government agency.