Social Security: How to Calculate Retirement Credits Earned for Your Work Income

Determining how much money you will receive by the time you reach that age at which you retire can be an uncertain or difficult calculation to determine. And it all depends on the income you have during the years of your working life. For each amount, the Social Security Administration (SSA) will give you a certain number of credits. In Just Money We will explain how it works.

The rule of thumb for Social Security is that the longer you work and the more you earn, the larger the check you receive for retirement will be. Calculating exactly how much money you are going to receive is not easy to obtain, since various factors intervene, but so that you can give yourself a clearer idea, we are going to explain how the SSA does it for the income that is obtained.

The first thing you need to know is that the SSA looks at your work history, adjusts your annual compensation to account for inflation, and then, select the 35 years of your working life in which your adjusted earnings were the highest.

Then, add up the income numbers and divide by 420, which is the number of months in 35 years of work. This is how the indexed average monthly income is obtained, which is known as AIME, for its acronym in English.

Then it’s time to take out your PIA, which is the primary insurance amount. This is determined with a formula where your year of birth is obtained. For example, as explained in a text by The Motley Fool, for those who turned 62 in 2022, the PIA is equal to 90% of the first $1,024 of your average indexed monthly earnings, plus 32% of AIME, plus the 15% of any amount that is greater than $6,172 dollars.

The next point is to define at what age Social Security payments will be requested: however early, it is established that they can be obtained at 67 years of age and the latest that they can be requested is at 70 years of age.

It really is complicated to calculate the amount of retirement for each senior, and doing it yourself can be difficult and even confusing. So the best thing is that you turn to an expert to help you do it or, enter the tools posted in the Social Security Administration (SSA), which will help you to know how much money will correspond to you according to your income and the age at which you retire.