How Social Security is calculated — and how to make sure you have enough money in retirement
The size of your Social Security check is based on more than just how long you worked. It depends on your lifetime earnings (adjusted for wage growth), the age you retire and a formula intended to replace a larger share of income for lower earners.
While Social Security isn’t designed to provide 100% of the money you’ll need in retirement, understanding how benefits are calculated can help you plan for your post-working years.
Worried about outliving your retirement savings? Annuities can help.
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Social Security
How is Social Security calculated?
The Social Security Administration calculates your retirement benefits by reviewing your lifetime earnings and indexing your highest 35 years for wage growth to determine your Average Indexed Monthly Earnings (AIME).
Your AIME is then used in a progressive formula to determine your Primary Insurance Amount (PIA), the benefit you’d receive if you began claiming at your full retirement age (FRA).
For people born in 1959, the FRA is 66 and 10 months. For anyone born in 1960 or later, it’s 67. You can start claiming Social Security at 62, but your benefits will be reduced each year you get a check before you reach your FRA.
To help ensure that Social Security replaces a larger share of earnings for lower-income workers, the formula applies different percentages to portions of your income, known as “bend points.”
The payout you receive is then adjusted based on the age when you start claiming benefits:
- Claiming at FRA: You receive 100% of your calculated PIA.
- Claiming early (62 to FRA): Your benefits are reduced for each month you claim before your FRA.
- Delaying until after FRA: You earn credits that increase your monthly check by a percentage (about 8% per year) for each month you wait past your FRA, up to age 70.
PRO TIP: Social Security calculators
The Social Security Administration has several calculators that can provide estimates of your monthly benefits. The Quick Calculator gives estimates for three different retirement ages, in today’s dollars or inflated for future dollars. You only need to input your date of birth, current annual income and projected retirement date.
If you know what you’ve earned each year you’ve worked, you can get a more accurate estimate using this online calculator.
How much is the average Social Security check?
For retired workers, the average Social Security check was just $2,029 per month in June 2026, equivalent to about $24,350 per year.
The average benefit across all Social Security beneficiaries — including retirees, disabled workers, survivors, and dependents — was about $1,938 per month, or close to $23,260 per year.
The benefits you receive could be substantially higher or lower, depending on factors such as:
- Your lifetime earnings.
- How many years you worked.
- The age you start claiming benefits.
What’s the most you can receive from Social Security?
If you earned the maximum taxable income each year beginning at age 22 and claimed benefits at age 70 in 2026, the largest possible monthly Social Security benefit would be $5,181 before any federal or state taxes.
That works out to about $62,172 per year, but to qualify, you’d need to have earned at least the maximum income subject to Social Security taxes for most of your career. (Social Security bases benefits on your highest 35 years of earnings.)
Assuming your FRA is 67:
- If you claim benefits at 62 (the earliest eligible age), your maximum monthly benefit would be $2,969.
- If you claim at 67, your FRA, your maximum monthly benefit would be $4,152.
- If you wait until 70 and earn delayed retirement credits, your maximum monthly benefit would be $5,181.
Is Social Security enough to live on?
Social Security isn’t supposed to provide enough for someone to live on. It was designed to replace roughly 40% of pre-retirement earnings for the average worker, with personal savings, investments, pensions and other income making up the remainder.
Even so, a substantial share of retirees depend heavily on their Social Security checks: According to the Congressional Research Service, 13.9% of beneficiaries ages 65 to 69 receive at least 90% of their household income from Social Security.
That percentage rises to 16.7% among those ages 70 to 74 and 26.9% among retirees age 80 and older.
Other ways to fund your retirement
Social Security is supposed to replace only about two-fifths of pre-retirement earnings, making other income an essential part of your retirement plan.
Retirement accounts
Nearly three-quarters of private-sector workers have access to employer-provided retirement benefits, typically a 401(k) account. If you’re among them, try to contribute at least enough to earn the full employer match, if one is offered.
If you make $100,000 each year and contribute 6% of your pre-tax income, at the end of 12 months, you’ll have $6,000. If your company offers a 4% match dollar-for-dollar, that’s an extra $4,000 toward retirement. Workers 50 or older can add additional catch-up contributions, and if you’re 60 to 63, you’re eligible for “super” catch-up contributions, subject to IRS annual limits.
An individual retirement account (IRA) isn’t tied to your workplace, so you can continue contributing as long as you have eligible earned income and meet IRS contribution rules. You can get started with a traditional or Roth IRA account with Fidelity with as little as $1, while Charles Schwab offers commission-free trading for U.S.-listed stocks and ETFs.
Fidelity Investments
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance for robo-advisor to start investing.
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over, which includes access to unlimited 30-minute coaching calls with a Fidelity advisor and tax-loss harvesting on taxable accounts).
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Bonus
None currently. Check Fidelity’s promotions page for the latest offers here.
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Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
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Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
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Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Terms apply.
Pros
- No commission fees for stock, ETF, options trades
- No transaction fees for over 3,400 mutual funds
- Fidelity Go® portfolios use Fidelity Flex® mutual funds with zero expense ratios
- Human advisors manage day-to-day Fidelity Go® portfolio decisions
- Unlimited 30-minute coaching calls with a Fidelity advisor for accounts of $25,000 and over (at no extra cost)
- Tax-loss harvesting available on taxable Fidelity Go® accounts with $25,000 or more
- Abundant educational tools and resources with research from 20-plus independent providers
- 24/7 customer service
- Over 100 brick-and-mortar branches across the U.S. for face-to-face support
Cons
- Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
- Fidelity Go® invests only in Fidelity Flex® mutual funds (no third-party ETFs or individual securities available)
- No socially responsible or ESG portfolio option through Fidelity Go®
- Some of Fidelity’s mutual funds require reaching specific thresholds
- Reports of platform outages during heavy trading days
Charles Schwab
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
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Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
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Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
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Investment options
Stocks, bonds, mutual funds, CDs and ETFs
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Educational resources
Schwab offers courses, educational articles, videos, and webinars for investors at every level, plus advanced screeners, research tools, and market insights through the Schwab Center for Financial Research.
Terms apply.
Pros
- $0 minimum deposit for active investing
- No commission fees for stock and ETF trades; no transaction fees for over 4,000 mutual funds
- thinkorswim® trading platform offers advanced charting, strategy testing and multi-device access
- Robo-advisor Schwab Intelligent Portfolios® available with no advisory fee or commissions
- Access to on-demand advice from Schwab investment professionals
- Nearly 400 brick-and-mortar branches across the U.S. for in-person support
Cons
- $5,000 minimum required for Schwab Intelligent Portfolios® robo-advisor
- $0.65 fee per options contract
- Tax-loss harvesting only available on balances of $50,000 or more within Intelligent Portfolios®
- High cash allocation requirement in Intelligent Portfolios® may limit returns compared to competitors
Annuities
As baby boomers worry about outliving their retirement funds, the popularity of annuities has soared in recent years. You can fund an annuity with a lump sum or through a series of payments. The money grows either at a fixed or variable rate, or it can be tied to a market index like the S&P 500, with limits on gains and losses.
An annuity can pay out every month, every quarter or even every year. Payments can continue for a set term (like 15 or 20 years) or for the rest of your life.
A $300,000 lifetime annuity could pay roughly $1,700 to $2,000 per month for someone retiring in their mid-60s, although the exact amount depends on your age, the insurer, current interest rates and the features you choose.
Investments
Dividend income, interest from bonds and CDs, rental properties and other investments can help supplement your retirement income. Vanguard is a popular choice for long-term investors thanks to its low-cost index funds, retirement planning tools and broad lineup of mutual funds and ETFs, including target-date retirement funds.
Vanguard
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Vanguard account, but minimum $1,000 deposit to invest in many retirement funds; robo-advisor Vanguard Digital Advisor® requires minimum $100 to enroll.
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock and ETF trades; zero transaction fees for over 3,000 mutual funds; $20 annual service fee for IRAs and brokerage accounts (waived with at least $50,000 in qualifying Vanguard assets or by opting into paperless statements); robo-advisor Vanguard Digital Advisor® charges approximately 0.15% net advisory fee annually (after fund revenue credits; 90-day fee waiver for new clients).
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Bonus
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Investment vehicles
Robo-advisor: Vanguard Digital Advisor® IRA: Vanguard Traditional, Roth, Rollover, Spousal and SEP IRAs Brokerage and trading: Vanguard Trading Other: Vanguard 529 Plan
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Investment options
Stocks, bonds, mutual funds, CDs, ETFs and options
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Educational resources
Retirement planning tools
Terms apply.
Pros
- No commission fees for stock and ETF trades
- No transaction fees for over 3,000 mutual funds
- One of the largest ETF and mutual fund offerings available, with an average expense ratio of 0.07%
- Robo-advisor Vanguard Digital Advisor® available with 90-day fee-free trial and approximately 0.15% net annual advisory fee after that
- Three portfolio strategies available through Digital Advisor: all-index, active/index, and ESG
- Vanguard Personal Advisor® offers access to a team of financial advisors starting at $50,000; dedicated CFP access available at $500,000 through Personal Advisor Select®
- Vanguard 529 Plan helps you save for college early on
- Excellent customer service with phone and email access Monday through Friday
Cons
- $20 annual service fee for IRAs and brokerage accounts (waived at $50,000 in qualifying assets or with paperless statements)
- Vanguard Digital Advisor® requires $100 minimum to enroll and charges approximately 0.15% net advisory fee after 90-day trial
- Digital Advisor portfolios invest only in Vanguard funds (no access to third-party ETFs)
- Basic trading platform compared to competitors; limited research and data tools
- No cash management account
Reverse mortgage
If you have substantial home equity, you may be a good candidate for a reverse mortgage. A lender provides you with a lump sum, a series of payments, or a line of credit, and as long as you live in the home and continue with upkeep, you won’t have to make any payments. The principal, interest and fees are due in full when you sell the house, stop using it as your primary residence or pass away.
A traditional Home Equity Conversion Mortgage (HECM), backed by the FHA, is available to homeowners 62 and older, but private lenders offer reverse mortgages to borrowers as young as 55.
Taking out a reverse mortgage reduces the equity you have in your home over time because interest and fees are added to the loan balance. And if you can’t keep up with maintenance or make property tax and insurance payments, you could face foreclosure.
You can borrow against the equity accrued in your home with a reverse mortgage
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Loan types
Flex Payment HECM, Flex Payment jumbo reverse, reverse for purchase, refinancing
Maximum loan
Up to $4 million for Flex Payment jumbo mortgages
FAQs
What’s the most you can get from Social Security?
In 2026, the maximum monthly Social Security retirement benefit you can receive is $5,181, but only if you delay claiming until age 70. If you claim at your full retirement age, it’s $4,152. If you start claiming at 62, the most you could receive is $2,969.
How much of your income is subject to the Social Security tax?
Social Security was intended as a kind of insurance, funded primarily through a payroll tax. Because benefits are capped, Congress also limits the amount of earnings subject to the Social Security payroll tax. It changes annually, based on changes in average national wages. In 2026, the maximum taxable earnings is $184,500. Any income above that isn’t subject to the Social Security tax.
Are Social Security benefits taxed?
Social Security payments have been subject to federal income tax since 1984, but whether your benefits are taxed depends on your combined income, including your adjusted gross income, any nontaxable interest and half of your Social Security benefits. If your combined income is below $25,000 ($32,000 for married couples filing jointly), your benefits generally aren’t taxable. If your income is between $25,000 and $34,000 ($32,000 to $44,000 for married couples), up to 50% of your benefits may be taxable. Above those thresholds, up to 85% of your benefits may be taxable.
Eight states tax Social Security: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont.
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