Social Security benefits provide partial replacement income for qualified retirees and disabled individuals, as well as for their spouses, children, and survivors.
Social Security provides a foundation of income on which workers can build to plan for their retirement and social insurance protection to workers who become disabled and to families whose breadwinner dies.
Formula to calculate social security benefit.
As in 2021, we calculate the social security benefits by adding all of the following;
- 90% of the first $996 in AIME
- 32% of the amount of AIME between $996 and $6,002
- 15% of the amount equal to or greater than $6,002 in AIME
AIME is the Average indexed monthly earnings.
Suppose your AIME is $ 5,000, calculate your social security benefit if you are 66 years old which is the full retirement age.
Therefore for the first $ 996 dollars, we calculate 90%.
= 90% x 996
Since the amount remaining is $4004, we will be needed to calculate the 32% of it.
= 32% x 4004
Then we add them together,
= 896.40 + 1,281.28
Therefore, your social benefits are $ 2,177.68.