Social Security Administration

In 2025, you earn 1 Social Security and Medicare credit for every $1,810 in covered earnings each year. To get the maximum 4 credits for the year, you must earn $7,240. These credits play a crucial role in determining eligibility for Social Security benefits, including retirement, disability, and survivors benefits. Remember, the credits you earn remain on your record even if you change jobs or have no earnings for a while.

The Social Security tax rate for 2025 is 6.2% for employees on all income up to $176,100. Employers deduct this tax from paychecks and match it, so a total of 12.4% goes to the program for each employee. If you're self-employed, you'll pay the full 12.4%, although you can deduct half on your tax return.

  1. Calculate Average Indexed Monthly Earnings (AIME):

    • Social Security consider your 35 highest-earning years (adjusted for inflation) to calculate your AIME
    • You worked for 10 years, so we’ll consider those 10 years of earnings.
    • Your annual earnings were $7,000 each year.
    • Adjusting for inflation, let’s assume an average annual earnings of $7,000.

  2. Calculate Primary Insurance Amount (PIA):

    • The PIA formula considers different portions of your AIME:

      • 90% of the first $1,174 of AIME
      • 32% of any amount over $1,174 up to $7,078
      • 15% of any amount over $7,078

    • Let’s compute the PIA:

      AIME = Total earnings Number of years worked = 10 × 7 , 000 10 = 7 , 000 \text{AIME} = \frac{\text{Total earnings}}{\text{Number of years worked}} = \frac{10 \times 7,000}{10} = 7,000

      PIA = 0.9 × 1 , 174 + 0.32 × ( AIME − 1 , 174 ) + 0.15 × ( AIME − 7 , 078 ) \text{PIA} = 0.9 \times 1,174 + 0.32 \times (\text{AIME} - 1,174) + 0.15 \times (\text{AIME} - 7,078)

      Plugging in the values:

      PIA = 0.9 × 1 , 174 + 0.32 × ( 7 , 000 − 1 , 174 ) + 0.15 × ( 7 , 000 − 7 , 078 ) = 1 , 056.60 + 1 , 766.08 + 0 = 2 , 822.68 \text{PIA} = 0.9 \times 1,174 + 0.32 \times (7,000 - 1,174) + 0.15 \times (7,000 - 7,078) = 1,056.60 + 1,766.08 + 0 = 2,822.68

  3. Monthly Benefit:

    • Your monthly benefit would be approximately:

      PIA 12 = 2 , 822.68 12 ≈ 235.22 \frac{\text{PIA}}{12} = \frac{2,822.68}{12} \approx 235.22

So, based on this simplified calculation, your estimated monthly Social Security benefit would be around $235.22. Remember that this is an approximation, and the actual benefit may differ. For a more precise estimate, consider using the official Social Security calculators.