Computing Social Security Income

Last updated: May 25, 2023

I’ve been wanting to code up a tool to compute social security income for quite some time now, and I finally made some significant progress on that front!

To build this tool, I had to gather all the relevant steps and calculations from across various ssa.gov and third-party sites – which was not trivial.

So, the objective of this post is to have every calculation and table needed to compute standard social security income, which the Social Security Administration (SSA) refers to as retirement insurance benefits (RIB), in a single page. 

Maybe for the first time in the history of humanity? Probably not. But if it does exist somewhere, I couldn’t find it. Perhaps the closest was this fool.com article, but it left out plenty of important details for actually doing the computation. 

But if you know of another page like this, let me know! Especially if that source provides definitive precision values for each computation step – not easy to find!

Note that I’m sticking to standard social security income here – nothing fancy like spousal benefits, disability benefits, etc. We’ll save those for a future post.

Alrighty, let’s go! 

Determine if Minimum Credits Obtained

To kick things off, first you have to determine if you’re even eligible for social security income, also known as being “fully insured”. 

To be eligible, you need to have 40 credits. After that, you’re golden.

These credits are sometimes referred to as a “quarter of coverage” (QC), because “before 1978, an individual generally was credited with a quarter of coverage for each quarter in which wages of $50 or more were paid”. But after 1978, they switched to using total annual earnings instead of this funky quarterly system. So the QC term is just a holdover term from a by-gone era.

So how do you earn a credit?

Well in 1978, “the law provided that a quarter of coverage be credited for each $250 of an individual’s total wages and self-employment income for calendar year 1978 (up to a maximum of 4 quarters of coverage for the year).”

But it’s not 1978 anymore! Thus, “the amount of earnings needed for a quarter of coverage changes automatically each year with changes in the national average wage index.”

So, you can earn a maximum of four credits a year, and how many credits you earn depends on your earned income that year and the cost of the credits that year (which increases with inflation over time). 

Cost of Credits

Below is a table from ssa.gov providing the cost of a credit for each year from 1978 to 2023.

Year	Earnings ($)	Year	Earnings ($)	Year	Earnings ($)
1978	250	1998	700	2018	1,320
1979	260	1999	740	2019	1,360
1980	290	2000	780	2020	1,410
1981	310	2001	830	2021	1,470
1982	340	2002	870	2022	1,510
1983	370	2003	890	2023	1,640
1984	390	2004	900
1985	410	2005	920
1986	440	2006	970
1987	460	2007	1,000
1988	470	2008	1,050
1989	500	2009	1,090
1990	520	2010	1,120
1991	540	2011	1,120
1992	570	2012	1,130
1993	590	2013	1,160
1994	620	2014	1,200
1995	630	2015	1,220
1996	640	2016	1,260
1997	670	2017	1,300

You could also compute these table values using the 1978 value and the national average wage index, but it’s easy enough to just pull the values from this (relatively small) table. 

Your Earnings History

The easiest way to get your earnings history is to create an account at the social security administration site, where it will provide a table of all your earned income for your entire career.

The SSA site will also tell you if you’ve hit 40 credits or not yet – very convenient! 

The SSA tool also provides some limited capabilities for estimating your future RIB for different scenarios, if you haven’t already started. But of course I want to do much deeper analysis (especially with regards to FIRE scenarios), which is why I’m going through all the effort to build this tool. 

Determine Taxable Income

Now if you’re getting your earnings history from the SSA site, it’s already providing you with your taxable income for social security purposes. Easy.

But if you’re getting those values from your own records, and you’ve earned an above average income at any point in your career, you’ll need to determine if you were over the maximum taxable income for any year. 

If so, you’ll need to change your income to that maximum value, also referred to as the “contribution and benefit base” (CBB), for all the subsequent calculations. That’s because that max value was the amount of income you paid social security taxes for that year.

The max taxable income for each year from 1937 to 2023 is provided in the table below, available on ssa.gov:

Year	Max Taxable Income ($)	Year	Max Taxable Income ($)	Year	Max Taxable Income ($)
1937-50	3,000	1986	42,000	2006	94,200
1951-54	3,600	1987	43,800	2007	97,500
1955-58	4,200	1988	45,000	2008	102,000
1959-65	4,800	1989	48,000	2009	106,800
1966-67	6,600	1990	51,300	2010	106,800
1968-71	7,800	1991	53,400	2011	106,800
1972	9,000	1992	55,500	2012	110,100
1973	10,800	1993	57,600	2013	113,700
1974	13,200	1994	60,600	2014	117,000
1975	14,100	1995	61,200	2015	118,500
1976	15,300	1996	62,700	2016	118,500
1977	16,500	1997	65,400	2017	127,200
1978	17,700	1998	68,400	2018	128,400
1979	22,900	1999	72,600	2019	132,900
1980	25,900	2000	76,200	2020	137,700
1981	29,700	2001	80,400	2021	142,800
1982	32,400	2002	84,900	2022	147,000
1983	35,700	2003	87,000	2023	160,200
1984	37,800	2004	87,900
1985	39,600	2005	90,000

Adjust Income For Inflation

Next up we need to adjust your historical earnings for inflation.

The SSA uses something called the Average Wage Index (AWI) to do this inflation adjustment. 

First, compute the year you turned 60. Easy. 

Then pick out the AWI for the year you turned 60 (sometimes referred to as your “AWI base”) using the table below, available on ssa.gov:

Year	AWI ($)	Year	AWI ($)	Year	AWI ($)
1951	2,799.16	1976	9,226.48	2001	32,921.92
1952	2,973.32	1977	9,779.44	2002	33,252.09
1953	3,139.44	1978	10,556.03	2003	34,064.95
1954	3,155.64	1979	11,479.46	2004	35,648.55
1955	3,301.44	1980	12,513.46	2005	36,952.94
1956	3,532.36	1981	13,773.10	2006	38,651.41
1957	3,641.72	1982	14,531.34	2007	40,405.48
1958	3,673.80	1983	15,239.24	2008	41,334.97
1959	3,855.80	1984	16,135.07	2009	40,711.61
1960	4,007.12	1985	16,822.51	2010	41,673.83
1961	4,086.76	1986	17,321.82	2011	42,979.61
1962	4,291.40	1987	18,426.51	2012	44,321.67
1963	4,396.64	1988	19,334.04	2013	44,888.16
1964	4,576.32	1989	20,099.55	2014	46,481.52
1965	4,658.72	1990	21,027.98	2015	48,098.63
1966	4,938.36	1991	21,811.60	2016	48,642.15
1967	5,213.44	1992	22,935.42	2017	50,321.89
1968	5,571.76	1993	23,132.67	2018	52,145.80
1969	5,893.76	1994	23,753.53	2019	54,099.99
1970	6,186.24	1995	24,705.66	2020	55,628.60
1971	6,497.08	1996	25,913.90	2021	60,575.07
1972	7,133.80	1997	27,426.00
1973	7,580.16	1998	28,861.44
1974	8,030.76	1999	30,469.84
1975	8,630.92	2000	32,154.82

Note: if you turned 60 after 2021, then here in 2023 you’re not yet 62, the earliest you can receive RIB. Computing future estimates of RIB I’ll be discussing in a future post. 

For each year of earnings before you turned 60, do the following:

• Divide your “Age 60” AWI value by the AWI value for that previous year. The SSA also refers to this ratio as an “index factor”. Round this value to the 7th digit place after the decimal, because that is the precision reported by this ssa.gov tool that generates factors. I’m not sure if that’s 100% correct, since I could not find anything definitive about how many decimals to retain (which is overlooked far too often), but hopefully it’s good enough. 

• Multiply this ratio/factor by your earnings for that year, to get your inflation-adjusted earnings. Round this result to the nearest cent.

Note: for the year you turned 60 and all subsequent years, the factor is always 1. Now you might initially think that’s a terrible rip-off: you’re not getting your earnings from your 60’s adjusted for inflation! WTF! But don’t worry – you’ll be getting Cost Of Living Adjustments (COLA) in a subsequent step.

Compute Average Indexed Monthly Earnings (AIME)

Now that we have all your inflation-adjusted earnings, it’s time to compute your Average Indexed Monthly Earnings (AIME).

Fortunately this step is pretty easy. Just add up the inflation-adjusted earnings of the 35 years with the highest values, and divide by 420 (the number of months in 35 years). 

Note that this will include plenty of zeros if you FIRE and never earn another dime. 

Truncate the resulting AIME value down to the lower dollar amount. 

Compute Primary Insurance Amount (PIA)

Next up is computing the Primary Insurance Amount (PIA), which is probably the term you’ll hear the second-most when discussing social security payments (after the main payment itself). 

First, compute the year you turned 62. Easy. 

Again note that if you’re not turning 62 this year or earlier, you’re not yet eligible to receive RIB. Computing future estimates of RIB I’ll be discussing in a future post. 

Next you’ll find the two “bend point” values for the year you turned 62 (even if you’re not starting RIB at age 62). Use the table below, available on ssa.gov:

Year	Bend Point 1 ($)	Bend Point 2 ($)	Year	Bend Point 1 ($)	Bend Point 2 ($)
1979	180	1,085	2002	592	3,567
1980	194	1,171	2003	606	3,653
1981	211	1,274	2004	612	3,689
1982	230	1,388	2005	627	3,779
1983	254	1,528	2006	656	3,955
1984	267	1,612	2007	680	4,100
1985	280	1,691	2008	711	4,288
1986	297	1,790	2009	744	4,483
1987	310	1,866	2010	761	4,586
1988	319	1,922	2011	749	4,517
1989	339	2,044	2012	767	4,624
1990	356	2,145	2013	791	4,768
1991	370	2,230	2014	816	4,917
1992	387	2,333	2015	826	4,980
1993	401	2,420	2016	856	5,157
1994	422	2,545	2017	885	5,336
1995	426	2,567	2018	895	5,397
1996	437	2,635	2019	926	5,583
1997	455	2,741	2020	960	5,785
1998	477	2,875	2021	996	6,002
1999	505	3,043	2022	1,024	6,172
2000	531	3,202	2023	1,115	6,721
2001	561	3,381

Note: these bend points are all just the 1979 bend points of $180 and $1,085 mapped forward in time using the AWI.

Now we can compute your PIA, using these bend points and your AIME. 

If your AIME is less than (or equal to) the first bend point:

PIA = 0.9 * AIME

If your AIME is between the first bend point and the second bend point (or equal to either bend point):

PIA = 0.9 * Bend Point 1 + 0.32 * (AIME – Bend Point 1)

If your AIME is greater than the second bend point:

PIA = 0.9 * Bend Point 1 + 0.32 * (Bend Point 2 – Bend Point 1) + 0.15 * (AIME – Bend Point 2)

Finally, truncate the PIA down to the lower dime. 

Cost of Living Adjustments (COLA)

Remember how I said not to panic about inflation earlier? Well now we’ll finally do the Cost of Living Adjustments (COLA)!

First, compute the year you turned 62. Easy. 

Next we’ll apply COLA to your PIA, from the year you turned 62 to the current year. 

For each of those years, pull the COLA value from the table below, available on ssa.gov:

Year	COLA (%)	Year	COLA (%)	Year	COLA (%)
1975	8	1995	2.6	2015	0
1976	6.4	1996	2.9	2016	0.3
1977	5.9	1997	2.1	2017	2
1978	6.5	1998	1.3	2018	2.8
1979	9.9	1999 a	2.5	2019	1.6
1980	14.3	2000	3.5	2020	1.3
1981	11.2	2001	2.6	2021	5.9
1982	7.4	2002	1.4	2022	8.7
1983	3.5	2003	2.1
1984	3.5	2004	2.7
1985	3.1	2005	4.1
1986	1.3	2006	3.3
1987	4.2	2007	2.3
1988	4	2008	5.8
1989	4.7	2009	0
1990	5.4	2010	0
1991	3.7	2011	3.6
1992	3	2012	1.7
1993	2.6	2013	1.5
1994	2.8	2014	1.7

For each one of those years from age 62 to the current year, do the following:

1. Multiply the PIA (which includes any COLA adjustments from previous years) by the COLA for that year: New PIA = Previous Year PIA * (1 + COLA/100)

2. Truncate the new PIA down the next lower dime. Note: this truncation must be done for each year, and should not be done simply after all COLA are applied.

Determine Full Retirement Age (FRA)

Now we need to determine your Full Retirement Age (FRA), also sometimes called the Normal Retirement Age (NRA). 

If you decide to start your social security income at this age, your RIB will match your PIA. Pretty straightforward.

Your FRA depends on what year you were born. See the table below, available on ssa.gov:

Birth Year	Full Retirement Age
1937 and prior	65
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943-54	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 and later	67

There’s also a quirky little exception for people born on January 1 described on that page. Weird. 

Early / Delayed Retirement Adjustment

But what if you don’t want to start your social security income (RIB) at exactly your FRA?

Fortunately the SSA lays out pretty clearly how your RIB is decreased or increased.

If you want to start RIB 36 months (3 years) or less before your FRA:

RIB = PIA * (1 – (5/9) * 0.01 * Number of Months Early)

If you want to start RIB more than 36 months before your FRA (maximum is 60 months if your FRA is 67, since earliest age you can start RIB is 62):

RIB = PIA * (1 – 0.2 – (5/12) * 0.01 * (Number of Months Early – 36))

If you want to start RIB after your FRA (maximum is 36 months if your FRA is 67, since latest age you can start RIB is 70):

RIB = PIA * (1 + (2/3) * 0.01 * Number of Months Later)

Note: the equation above for starting RIB after your FRA assumes you were born in 1943 or later. If not, divide the delayed retirement credit per year in the table provided by ssa.gov to determine how much each additional month will increase your RIB.

You can also use this overly complicated table provided by the SSA to check the value you got from the above equations. 

Final Truncation

Finally, after all the above math, you just need to truncate the result to the next lower dollar amount. That’s the amount you’ll get from the SSA each month.

Diagrams

Below are a couple of diagrams visualizing the above steps. Initially I tried to put it into a single slide, but you can easily see how crazy that would have been.

Examples and Testing

Of course any time you build a new tool or model, it’s vitally important to test it.

My first two test cases were straight from the SSA site: Case A and Case B.

And fortunately I was able to perfectly match the values provided at every step. And I was able to determine/confirm the required precision needed at each step by comparing my values to those provided in the page. 

I’m very glad they provide these examples. 

There’s a lot more testing I want to do though. There are numerous calculators provided by the SSA and many, many, many, many, many, many, many, many, many, many, many, many, many others that I’d like to compare my tool to. 

I also happen to know some folks that are either taking social security income now or could take it now (but are currently waiting), so I’d like to get their values and confirm I get the same income generated by the SSA. 

Code

In the end it took about 500 lines of Python code to compute just this most standard social security income. Nothing fancy like spousal benefits, disability benefits, etc. 

I’ve placed the code in the EYFI github repo, which you’re welcome to download and run yourself if you’d like to plug in your own values or just play around with different inputs.

You can also run the embedded Python interpreter below. Modify the user inputs section at the top as desired, then hit the Run/Play (sideways triangle) button to generate the plots. To go back to the script to make any changes, hit the Pencil icon. If you want the text larger, hit the hamburger menu button, then scroll to the bottom to see larger font options. In that same menu you can also Full Screen the window, and other actions.

Analysis Questions and Future Work

Now that I have a tool that can compute social security income, and which I can fully automate and control via Python (unlike every other calculator listed above), there are a TON of really interesting questions and analysis I’d like to pursue. And additional capabilities to build as well. 

The biggest questions I’d like to answer are:

1. When is the optimal time to take social security? Is it really best to wait until age 70 as so many social security advisors and pundits recommend? What about the ROI on the earnings you’ll get if you take social security earlier?

2. If you have a spouse, how does that change the optimal timing? It looks like spousal benefits are based on PIA, so taking RIB early or late might not have an impact on spousal benefits – but I want to verify.

3. How are social security benefits impacted by FIRE? And how much more social security can you expect to get if you fall victim to the “one more year” syndrome? What if you start a business after FIRE?

4. Maybe: what happens if the trust fund reserves are exhausted in 2037 and we only receive 76% of our nominal benefits? How does that impact the decision process?

To answer these questions, I’m also going to need to build the ability to generate future RIB estimates. Hopefully that will be reasonably straightforward, especially if I keep everything in present day dollars (so no inflation factors will be involved).

I’ve also read that the Open Social Security calculator takes into account actuarial values for probability of death each year when delivering a recommendation on when to start social security – I’d love to replicate that if possible, and perhaps explore further questions I have. 

Lots more to do!

It’s funny how social security is one of those topics that people really care about (as they should), and yet is so surprisingly complex that most people quickly shut down when faced with trying to figure it all out. Hopefully this post providing every step gives you a better sense of the overall calculation, and demystifies it at least a little.

If you have any particular burning social security questions, let me know!