7 Social Security Rules Every Retiree Needs to Know

All right.

This may be one of the most obvious, but the benefit that you receive is going to be based on your earnings record.

And it's not just your earnings record.

It is your highest 35 years of indexed earnings.

not your actual earnings, and it is 35 years.

So some of the pension calculations that are out there that people are used to seeing where it's based on the average of the highest three or something like that, there's some assumptions sometimes that that's the way Social Security does it as well.

No, it's the highest 35 years of indexed earnings.

Now, here's what that index part means.

John, if I looked at your earnings and we were to index those up, this is what the Social Security Administration does to bring all all of your prior earnings to a number that reflects what it would be in today's dollars.

Right.

For example, your earnings when you were 18 years old, there would be a multiplier attached to that.

That would probably be somewhere around 4.01875, right?

Anything multiplied by zero is zero.

Yes.

All right.

Then let's say 20.

All right.

At 20, you multiply those earnings and that becomes your indexed earnings.

Now, the way you get these indexed earnings is the Social Security Administration actually has a website you can go to or a web page you can go to.

You put in the age that you're turning 62 and it will give you all the prior indexing factors.

Right.

And then you can go back and you can multiply your actual earnings by the indexing factor, and that will give you your indexed earnings.

And then you can just sort those and you can pick out your high 35.

Those are the numbers that the Social Security Administration is going to use.

Now, here's what's interesting.

All right.

This may be one of the most obvious, but the benefit that you receive is going to be based on your earnings record.

And it's not just your earnings record.

It is your highest 35 years of indexed earnings.

not your actual earnings, and it is 35 years.

So some of the pension calculations that are out there that people are used to seeing where it's based on the average of the highest three or something like that, there's some assumptions sometimes that that's the way Social Security does it as well.

No, it's the highest 35 years of indexed earnings.

Now, here's what that index part means.

John, if I looked at your earnings and we were to index those up, this is what the Social Security Administration does to bring all all of your prior earnings to a number that reflects what it would be in today's dollars.

Right.

For example, your earnings when you were 18 years old, there would be a multiplier attached to that.

That would probably be somewhere around 4.01875, right?

Anything multiplied by zero is zero.

Yes.

All right.

Then let's say 20.

All right.

At 20, you multiply those earnings and that becomes your indexed earnings.

Now, the way you get these indexed earnings is the Social Security Administration actually has a website you can go to or a web page you can go to.

You put in the age that you're turning 62 and it will give you all the prior indexing factors.

Right.

And then you can go back and you can multiply your actual earnings by the indexing factor, and that will give you your indexed earnings.

And then you can just sort those and you can pick out your high 35.

Those are the numbers that the Social Security Administration is going to use.

Now, here's what's interesting.