Dear Liz: A while back, you responded to a letter writer that Social Security’s estimates of the amount a person will receive assumes the person will continue working until they apply for benefits. I thought the amount a person receives was based on the average of the highest 30 years’ of earnings over a person’s entire career. Can you please clarify?
Answer: Social Security retirement benefits are based on your 35 highest-earning years. To estimate your future benefit, the agency assumes you will continue working for a similar wage to the one you’re making now, and that you will do so until you apply. The agency compares these projected earnings years with those you’ve already had, and picks the top 35 years to determine your estimate.
Life may not follow this script, of course, so the estimates aren’t guarantees of future benefits. If you spend much time out of the workforce or earn much more or much less than you do now, your actual checks could be quite different from the estimates.
Still, the estimates can give you a starting point for figuring out how much additional income you may need in retirement, which in turn will help you determine how much to save from your current earnings. As you get closer to retirement age, you’ll get a better idea of how much you’re likely to get. You’ll also see how delaying the start of benefits can enhance the amount you get over your remaining lifetime. Once you have a claiming strategy, you can plan your retirement income strategy around that amount.