Where can I find this year's publication for calculating Social Security Benefits? Last year, it was published in Social Security Publication 05-10070. It used to list all of the index factors so you could calculate your highest 35 years of wage-indexed earnings. Have they changed the formula for calculating benefits? Or are they just not publishing the Index Factors?

Also, are these the same factors that Social Security uses to calculate your estimated benefits when they generate your Social Security Statement? I have noticed that the maximum earnings for each previous year stay the same, but the index factor changes each year.

Thank you.

Hi,

Apparently Social Security decided to stop including indexing factors in their publication that explains how Social Security retirement benefits are calculated (https://www.ssa.gov/pubs/EN-05-10070.pdf). However, you can find the indexing factors for people born in 1958 in the following section of Social Security's operations manual: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605945.

I'm just speculating, but my guess would be that indexing factors were removed from the publication you mention because people were likely using incorrect indexing factors to estimate their benefits. That would cause their estimates to be inaccurate and misleading. Indexing factors are different for every year of birth, so if for example a person born in 1957 calculates their estimated benefit using the indexing factors for people born in 1958, they'll come up with an inaccurate estimate.

And yes, the indexing factors published in Social Security's operations manual are the same indexing factors that Social Security uses to calculate actual benefits. The 'maximum earnings' figures listed in the chart are the actual maximum wages that were subject to Social Security taxes in each year. Those aren't the maximum amounts that a person could be credited with for those years after indexing, though. The maximum amount of indexed earnings that a person could be credited with for each year in the past would be different for each year of birth.

For example, say that 2 people, one born in 1957 and one born in 1958, want to calculate their indexed earnings for the year 1986. Both of these individuals earned the maximum amount of earnings subject to Social Security taxes that year, which was $42,000. The indexing factor for 1986 for people born in 1957 is 2.9051156, whereas for people born in 1958 it is 3.0104111. Therefore, the maximum indexed earnings that a person born in 1957 could be credited with for 1986 is $122,014.85 (i.e. $42,000 x 2.9051156), while the maximum for a person born in 1958 would be $126,437.26 (i.e. $42,000 x 3.0104111).

The example above shouldn't be misunderstood to conclude that a person born in 1958 would end up with a higher benefit rate as a result of the higher indexing factors, though. Indexing factors are based on the ratio of the national average earnings in the year that a person turns age 60 as compared to the national average earnings in the year to be indexed. The fact that a person born in 1958 would have higher total indexed earnings than a person born in 1957 if they had the same earnings histories is only part of the equation used to calculate benefits. Social Security cost of living increases (COLA) are applied to retirement benefit rates starting with the year following the year in which a person reaches age 62. So, in this example the person born in 1957 would be credited with the 2020 1.6% COLA, but the person born in 1958 would not. That tends to balance out the maximum possible benefit rates between people born in different years.

You may want to consider using our software (https://maximizemysocialsecurity.com/purchase) to get an accurate estimate of your benefit rate, and to fully analyze the filing options available to you in order to determine your best strategy for maximizing benefits.

Best, Jerry