Your Social Security estimate assumes you keep working

Open your Social Security Statement and you will see a row of monthly amounts, one for each age from 62 to 70. It looks like a quote. It is closer to a forecast, and one built on an assumption most people never read: that you will keep earning what you earn now, every year, until the day you claim.

For someone planning to work to 67, that assumption is harmless. For someone planning to stop at 58 and claim at 67, it overstates the check. This guide walks through how the number is built, what that assumption does to it, and how to rerun it for the plan you actually have.

What the number on your Statement is

The Statement is available online through a my Social Security account, and people 60 and older without an account get it in the mail three months before their birthday.^[2] The current design shows your personalized retirement estimate at nine different starting ages, along with your earnings history and how to report an error in it.^[2]

Every figure on it starts from one number, the primary insurance amount, or PIA. That is the monthly benefit you would get if you started exactly at your full retirement age, neither reduced for claiming early nor increased for waiting.^[5] The amounts for 62 and 70 are the same PIA with a reduction or a credit applied. So the questions are what goes into the PIA, and what the Statement assumes about the years it has not seen yet.

How the benefit is built: 35 years, indexed

The calculation has four steps, and each one is published by the agency’s actuaries.

Indexing lifts old paychecks to today’s wage levels, so a $20,000 salary from decades ago is not treated as small money. For someone who turns 62 in 2027, each year before 2025 is multiplied by the ratio of the 2025 national average wage index (72,800.33) to that year’s index, and earnings in 2025 or later are taken at face value.^[7]

The 35-year cut is where gaps hurt. The agency chooses the years with the highest indexed earnings, sums them and divides by the months in those years, and up to 35 years are needed.^[4] Its own Statement puts it plainly: if you have fewer than 35 years of earnings, years without work count as 0 and may reduce your benefit amount.^[1] Earnings above the taxable maximum, which is $192,300 in 2027, do not count either.^[11]

The formula is deliberately progressive. For a worker first eligible in 2027, the PIA is the sum of:^[5]

That shape matters for everything below. The first dollars of your average earn 90 cents of monthly benefit, and the dollars past $1,340 earn 32 cents. So losing earnings costs you less, in percentage terms, than you might expect, and the people the formula protects most are those with low or interrupted careers.

The assumption inside the estimate

The agency’s sample Statement spells out the assumption in one line: the estimates are based on your earnings to date and assume you continue to earn a stated amount per year until you start your benefits.^[1] In the sample, that amount is exactly the figure on the last recorded line of the earnings history. Your Statement fills every year between now and each claiming age with your latest pay.

That works in three different ways depending on where you are.

1. 1
   You already have 35 strong years

   Future years at the same pay only replace years that are about as good, so stopping early changes little. The estimate is close to what you will get.
2. 2
   You have fewer than 35 years

   The estimate counts the future years you have not worked yet. If you stop, those years become zeros, and the average falls.
3. 3
   Your last year was unusual

   A sabbatical, a part-time year or a one-off bonus becomes the assumed salary for every remaining year. The estimate moves in the same direction as that year.

The second case is the one that surprises people. The agency’s own fact sheet for workers with gaps says that years with no earnings count as zeroes in the benefit calculation, and that each extra year of work replaces a zero or low earnings year.^[3]

A worked example: the estimate against stopping now

Take someone born in 1965. They turn 62 in 2027, so the 2027 formula is theirs, and their full retirement age is 67.^[8] To keep the arithmetic readable, assume every year they have worked comes to $60,000 after indexing, and that they have 29 such years on record today.

What the Statement assumes. Six more years at $60,000 brings the record to 35 years. Total indexed earnings are 35 × $60,000 = $2,100,000, and divided by 420 months that is an average of $5,000. The PIA is 90% of $1,340 ($1,206.00) plus 32% of the $3,660 above it ($1,171.20): $2,377.20 a month at 67.^[5]

What happens if they stop now. The record stays at 29 years, and six zeros fill the rest. $1,740,000 divided by 420 is $4,142.86, rounded down to $4,142. The PIA is $1,206.00 plus 32% of $2,802 ($896.64), or $2,102.64, which the agency rounds down to the next ten cents: $2,102.60.^[5]

Six missing years cut the average by 17%, but the benefit falls by only about 12%, because the lost dollars all sat in the 32% slice. That is the progressive formula at work. It is still $274.60 a month, or roughly $3,300 a year, for as long as the benefit is paid, before any cost-of-living adjustments.

Whether those six years are worth working is a different question, and mostly a question about everything else you have. A benefit gap of $3,300 a year is one input; the balances that would carry you through those years are the other, and the order you fund your 401(k), IRA and HSA in decides how large and how taxable they are by then.

What claiming at 62, 67 or 70 does to it

The PIA is the benefit at full retirement age. Claiming at any other age multiplies it by a fixed factor. For anyone born in 1960 or later, full retirement age is 67, and starting at 62 reduces the benefit by 30%: a $1,000 benefit becomes $700.^[8] Waiting past 67 adds 8% a year, or 2/3 of 1% a month, for anyone born in 1943 or later, and the increase stops at 70.^[9]

For the example, that is about $1,664 a month at 62, $2,377 at 67, and $2,947 at 70. The gap between the first and last is about $1,283 a month, for life. Two details catch people out:

• Cost-of-living adjustments start at 62 regardless. You are eligible for them from the year you turn 62, even if you do not claim until 67 or 70.^[10] The 2027 adjustment is 3.6%, and the agency estimates the average retired-worker benefit rises from $2,095 to $2,170 a month in January 2027.^[11][12]
• Working while claiming early can withhold benefits. Below full retirement age in 2027, $1 is withheld for every $2 you earn above $25,560. In the year you reach full retirement age the limit is $67,920 and $1 is withheld for every $3, and the test stops applying in the month you reach it.^[11]

If you are married, the claiming age also sets what a surviving spouse can receive: the sample Statement notes that claiming after full retirement age may increase that amount and claiming early may reduce it.^[1]

What the trust fund date means for your number

The Statement carries a line saying its estimates are based on current law, which Congress has revised before and may revise again.^[1] The reason is the trust fund projection. The 2026 Trustees Report finds the retirement (OASI) trust fund has enough reserves to pay full benefits on time until 2032. Without legislation, continuing income at that point would pay 78% of OASI benefits.^[14]

Counted together with the disability fund, which would require a law allowing transfers between them, reserves last until 2034, when continuing income would cover about 83% of program cost.^[14] The long-range deficit grew this year, to 4.42% of taxable payroll over 75 years from 3.82% in the previous report.^[14]

How to check and adjust your own estimate

The agency’s own tool does most of the work. Its my Social Security Retirement Calculator compares estimates at 62, full retirement age and 70 from your actual earnings record, and lets you enter different future annual earnings and a different starting age.^[13] That second part is how you replace the Statement’s assumption with your plan.

1. 1
   Read the assumed salary on your Statement

   Find the line saying what it assumes you continue to earn. If that is not the pay you expect to have until you claim, the estimates on the page are not yours yet.
2. 2
   Count your years

   Count the years on your earnings record with real earnings. Under 35 means every year you stop early is a zero; 35 or more means stopping early costs much less.
3. 3
   Check the record against your W-2s

   The benefit is computed from what the agency has on file, not what you earned. A missing year is a zero you did not earn.
4. 4
   Rerun it with your own plan

   The my Social Security Retirement Calculator takes different future annual earnings and the age you want benefits to start. Enter what you actually expect, including nothing after the year you plan to stop.
5. 5
   Write down both versions

   Keep the current-law figure and a 78% figure side by side in your plan until Congress settles the question.

The third step has a deadline that has nothing to do with retirement. An error on your earnings record can only be corrected for a limited time after the year the wages were paid, which is why your W-2s are worth keeping past the tax clock. And the gross pay on those W-2s is the figure that counts, not your take-home: the 6.2% withheld from each check is the Social Security line between your salary and your deposit, and it is what buys the credits on that record.

A Social Security benefit never shows up as a balance, which is why it is easy to leave out of a plan. It belongs next to the accounts you do see. In LumaLedger, the Net worth page lists every account you link or add by hand, so the savings that would cover any gap between stopping work and claiming sit in one place, and the Statement itself can live in the Documents vault beside the W-2s that back it up. If you are still building that list, a net worth calculation from scratch is the place to start.

LumaLedger

Net worth

$286,410.22

▲ $18,240 (6.8%) · Past year

1M3MYTD1YALL

Assets$512,300

Real estate· 1$318,00062%

Retirement· 3$96,40019%

Cash· 2$42,2008%

Investments· 1$28,7006%

Vehicles· 1$27,0005%

Liabilities$225,890

Mortgage· 1$211,40094%

Auto loan· 1$11,8505%

Credit cards· 2$2,6401%

The estimate on your Statement is a good number for the person it describes: someone who keeps earning their latest salary until they claim. If that is your plan, trust it. If it is not, an afternoon with the calculator and your earnings record will give you the number that is.