How do you estimate social security benefits? It’s a pretty straightforward two-step process. I’ll show you how to do it, and share a spreadsheet you can use to estimate the benefits for yourself.
Step 1: Your Earnings
Your benefits are based on your earnings. Earnings can be divided into two groups: what you’ve already earned in the past and what you will earn in the future.
Past Earnings Record
See your earnings history through the Social Security Administration website. If you haven’t created an account yet, you’ll need to do that first:
Once you have an account set up, click Earnings Record from the right side menu.
You’ll see a list of all your earnings by year, similar to this redacted one:
It’s rare to find a mistake in that list, but it’s worth taking a few minutes to double check that the values are correct.
Future Earnings Estimates
The Social Security Administration website does a great job with the past, but you will have a better estimate of your future. So I suggest using today’s dollars and repeating the exercise for a few different scenarios:
- Work until Age 65 earning just what you do now
- Retire earlier than Age 65 earning just what you do now
- Future earnings are worse than expected
- Future earnings are better than expected
Exploring some of these scenarios will help you get a feel for how sensitive your plans are to changes in your social security benefits.
Step 2: Estimate Social Security Benefit
You can do all this work by yourself, or you can use a spreadsheet I made that will do all the calculations for you.
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Estimated Monthly Benefit at Full Retirement Age
If you have the Social Security Estimator sheet open, you’ll see green boxes for every field that needs your input. Some of the green boxes already have example text in them, just overwrite them to replace with values that are accurate for you:
First, enter the year you were born, so that we know your full retirement age.
Next, Enter a “1” for male or a “2” for female. Women tend to live longer and thus tend to earn more benefit from social security.
Then use the data on the Social Security Administration website to enter all your past earnings in the first column.
Finally, use your best guess or explore a few scenarios in the Future Earnings Estimate (don’t account for inflation – use real dollars).
The spreadsheet does the rest, and will report your expected benefit based on the current method for calculation, like this:
If you’ve downloaded the Social Security Estimator and inputted accurate data, you should see a display similar to Figure 5 above. The benefit is the dollar value per month (in present day dollars) you can expect at your full retirement age. Next to it is the present value of that future stream of income. This is how much someone would have to pay you right now for you to break even and give up your benefit. This is an estimate of a real asset you own, and one that will be growing as you live and work.
I just wrote a plan for Median Mike to retire which relied on Social Security making up 40% of his income. I’m sure Mike would want to know if that’s an accurate estimate or not.
Conclusions and Caveats
Social Security is a cornerstone to many retirement plans, so you should know something about it. You can estimate social security benefits on the official website, but you’ll be limited by the lack of future earnings data. The spreadsheet found in this post will give you flexibility to explore and plan on your own.
There are a lot of special cases, including those involving spousal benefits, disability, and the deferred benefit option. This isn’t that. This is a way for you to estimate your benefit if you are a typical person. Comment below with your demands for ever more complicated and specific spreadsheets, and I’ll be happy to entertain them!