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Is Social Security based on Last 3 years of Work? – Ask Rusty

Posted on Monday, May 6, 2019
by Outside Contributor

Dear Rusty: I have heard many times that what is earned the last 3 years you work before drawing Social Security benefits determines what your benefit dollar amount will be. Is this true? If not, what determines your benefit dollar amount and how is it calculated? Signed: Working Still

Dear Working:  Funny how true the adage – if you say something often enough, people will believe it is true. But I’m afraid that what you’ve heard so many times about how your Social Security benefit is determined is incorrect. While it’s true that the last 3 years you work may affect your Social Security benefit amount when you claim, those years alone are not what determines your benefit dollar amount. Rather, your benefit is determined using a formula which includes the highest earning 35 years of your lifetime working career. Each year in your lifetime earnings record will be adjusted for inflation, the highest earning 35 years will be selected and your “average indexed monthly earnings” (AIME) will be computed from those years. And to clarify another often-misunderstood point, you only get credit for earnings on which you paid FICA taxes, so earnings up to the annual payroll tax cap are the only earnings counted.

For most people, the latter years of their working career are the highest earning, so it’s quite likely that your last few years of earnings will be included in the 35 which are used to determine your benefit. Once your AIME is computed from your lifetime earnings record, it is subjected to a standard formula to arrive at your Primary Insurance Amount (PIA), which is the benefit you are entitled to at your full retirement age. If you claim benefits before your full retirement age (FRA) that benefit will be reduced, by up to 30% depending upon how many months before your FRA that you claim. And if you wish to increase your benefit you can wait beyond your FRA to claim and earn delayed retirement credits of 8% per year, up to age 70. Claiming at age 70 could get you a benefit as much as 32% more than it would be at your full retirement age (depending upon the number of months after your FRA that you claim benefits).

Unfortunately, there are many myths floating around about how your Social Security benefit is determined, and what you’ve previously heard is but one variation of those myths. But reality is as described above – the highest earning 35 years of your lifetime earnings record are used to determine your average monthly career earnings (adjusted for inflation), and that 35-year lifetime average becomes the basis for your Social Security benefit. Anything else you hear to the contrary is simply incorrect.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website ( or email us at [email protected].

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4 years ago

While preparing income taxes earlier this year, my accountant mentioned that, although people generally are aware of the advantage of waiting until age 70 to start collecting Social Security, a great majority take SS as soon as they are able to. He recommended that if we can wait until 70, or even a couple of years beyond our FRA, we will collect bigger checks. Those of us with longevity in the family should wait as long as possible (to 70) to start collecting because we will get a few to many hundreds of dollars more each month.
Many of us Boomers will enjoy a longer life expectancy than those in the previous generations because of medical advances. Whether the quality of life is “enjoyable” or not is determined on a case-by-case basis. Certainly, those who are in need of income now must do what they need to do.

Because I was born before 1954, have been divorced for a while, was married for more than 10 years to a man older than I (age matters), and have not remarried, I have been collecting half of my ex’s SS benefit since my FRA. So, those of you (I’m not sure if it applies only to women–Rusty??) trying to decide on your second wedding cake, you might think again. A few of my friends have committed to their partners, except in the eyes of the law or the church, but decided to not marry for this reason. And for those women in this age range who are contemplating divorce might consider waiting until after the 10th year, if you can stand it, before proceeding. (Check with your attorney in case the law has changed.) That’s a big chunk of change to leave on the sidelines.

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