3 Ways to Score a Richer Monthly Social Security Payout
The Social Security formula for retirement benefits is a bit complex, but the basic idea isn't too difficult to understand. The basic idea is that the Social Security Administration (SSA) keeps track of how much you earn each year from employment. When you retire, each year's earnings, up to the annual Social Security taxable maximum, are indexed for inflation. Your 35 highest-earning years are then taken into consideration.
These 35 years of inflation-adjusted earnings are then averaged and divided by 12 to produce your average indexed monthly earnings, or AIME. This is applied to the benefit formula in effect for the year in which you become eligible for Social Security to determine your primary insurance amount (PIA), which is the Social Security benefit you'd get if you claim at your full retirement age. This can range from 66 to 67 years of age, depending on when you were born.
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Source Fool.com
