Despite Social Security payments being so anticipated for retirees, it is surprising how little many know about how the amount of money one will receive during retirement will be calculated. To a point, the general logic of “the more you earn and contribute in taxes the more you will get” stands up the test of time, but since the program is not infinitely scalable and there is a maximum payment, $5,108 in 2025, there comes a point when earning more is not what will get you a higher benefit. In fact, just your earnings will not get you the highest benefit possible.
Going back to basics, the first thing you need to know is how the Social Security Administration (SSA) calculates your benefit. This can be quite complicated if you are not good at math, but if you can follow along with our explanation, you should be fine to calculate your numbers on your own. The first thing you will need to calculate is your Average Indexed Monthly Earnings (AIME), and to do this, you will need to take your 35 highest earning years of your career. If you have not worked 35 years, you will need to replace these with zeros.
Once you have those 35 years of earnings, they will need to be adjusted (indexed) to account for wage growth over time. This ensures your older earnings are comparable to today’s wages. Then, the total of those 35 years of indexed earnings is divided by 420 months (35 years × 12 months) to get your average monthly earnings.
Once you have the amount in your AIME, you will need to figure out your Primary Insurance Amount (PIA), which is your maximum payment that you would receive should you choose to retire at your full retirement age, not a day before or after. This is calculated by using a specific formula that uses bend points.
According to the SSA, “The PIA is the sum of three separate percentages of portions of the AIME. While the percentages of this PIA formula are fixed by law, the dollar amounts in the formula change annually with changes in the national average wage index. These dollar amounts, called “bend points,” govern the portions of the AIME. The bend points in the 2025 PIA formula, $1,226 and $7,391, apply for workers becoming eligible in 2025.”
Taking these numbers, the formula would look like this:
- 90% of the first $1,226 of your AIME, plus
- 32% of your AIME over $1,226 and up to $7,391, plus
- 15% of your AIME over $7,391
How to get the maximum Social Security benefit
While this is all very nice to know, the important question here is how to maximize benefits, and even by earning the maximum amount that is taxed for Social Security if you retired at full retirement age in 2025, the maximum amount in benefits you would be able to receive (and this is if you have managed to contribute the maximum for the 35 years considered in the formula) is $4,018. This means that there must be something else you can do to boost benefits.
If you truly want to receiver the maximum possible payment you will need to delay your claim until age 70. This is because full retirement age gives you 100% of your PIA, but, for every year you delay claiming benefits, these grow 8%, meaning that if you wait to retire you can get 124% of your PIA. Note that the system also works the other way around, and if you choose to retire early (age 62, for example) you can lose up to 30% of your benefits.