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  • Writer's pictureChris Stein, CFP®

Social Security Benefit Estimate Assumptions

The benefit estimate generated by the Social Security Administration can be confusing for many people, especially younger workers.  What assumptions does the SSA make to generate that estimate? We recently had a question from a reader who asked about this. His question reads:

What are the projections and assumptions used by the Social Security Administration when estimating the PIA (Primary Insurance Amount) for those who are shy of 35 years of paying in to the system? For example, for a 30 year old who has less than 10 years of work history, what salary and inflation assumptions are used to project what that person’s PIA may be when he/she is full retirement age?  Are future earnings assumed to be the same as current earnings?  Is inflation assumed to be a flat 3% or something?

If you’ve seen your benefit estimate (and you really should take a look at it), you’ll notice that the SSA projects your benefit amount until age 62. In order to make this projection, the SSA makes a few assumptions regarding your income and inflation.


To calculate your estimate, the SSA assumes that you will continue to earn what you earned the previous year through age 62. So for example, for a 30 year old worker receiving their benefit estimate, the SSA looked at what that worker earned at age 29 and used that dollar amount to project earnings through age 62. The SSA assumed that the income didn’t change from age 29 to age 62 in order to generate the benefit estimate at age 30. For the same worker at age 31, the SSA will use income earned at age 30 to generate a new estimate.

If your income for the previous year was $0, the SSA will look back two years to make their benefit estimate. If your income was $0 for two years in a row, the SSA will just use that zero dollar amount to make that projection. So if you had two years in a row where your income was low or $0, your benefit estimate will be way off assuming you go back to a job that has substantial earnings.


The SSA also assumes that there is no inflation when calculating your benefit estimate. They assume prices will not go up and they assume your wages will not go up as you approach age 62. In reality, this is unlikely to happen.

Low Estimate

The income and inflation assumptions made by the SSA generally cause their estimate for your retirement benefit to be low, especially if you are a younger worker. The SSA does this on purpose. They’re hoping to encourage people to save more for their own retirement. This isn’t a bad thing, but if you’re trying to use your Social Security benefit estimate to do some longer term planning, you may want to calculate your benefit yourself with some more realistic assumptions.

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