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Mark Miller: Remaking Retirement

How Your Social Security Benefit Is Calculated

Years of employment (and unemployment), wage inflation, a weighted insurance amount formula, mortality tables, and inflation adjustments all factor in.

If you've checked your annual Social Security statement lately, you probably know the size of the benefit you're projected to receive in retirement. But do you know how that number is calculated?

Social Security determines your initial benefit at full retirement age (FRA) using a complex formula that takes into account your earning history, wage inflation, and a present-value calculation. If you want to understand how the math in those formulas works, there's no better person to ask than Stephen C. Goss, chief actuary of the Social Security Administration (SSA).