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Are Social Security payouts based on the last 40 quarters, or overall earnings? That is:

If the last 40 quarters of my working career are lower than these past 40 quarters worth, how does this affect Social Security payouts? (If it's around when I retire.)

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The Social Security payments for retirement are based on 35 years of indexed earnings. If you have less than 35 years of earnings, then your record will have zeros. If you have more than 35 years, the lowest indexed amounts will be dropped. If someone is receiving benefits but is also working, then the benefits are re-calculated (and thus increased) if one of the 35 previous "highest" years can be replaced with a newer "top-35" year. (There is a time-delay in this recalculation; it does not happen as soon as the year ends)

The 40 Quarters requirement is the minimum number of quarters to be eligible for retirement benefits. Once you reach 40 Quarters, the top 35 years' earnings calculation is used.

The Social Security Administration even has a table (Benefit Calculation Examples for Workers Retiring in 2015) to explain this. The SSA also indexes your earnings so that it reflects changes in the standard of living. You can see the indexing factors.

You can use, and should use the My Social Security Account to check your own estimates and to:

  • Keep track of your earnings and verify them every year;
  • Get an estimate of your future benefits if you are still working;
  • Get a letter with proof of your benefits if you currently receive them; and
  • Manage your benefits
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    Additional information: The Social Security benefits are based on a weighted sum of the highest 35 years of earnings. If someone is receiving benefits but is also working, then the benefits are re-calculated (and thus increased) if one of the 35 previous "highest" years can be replaced with a newer "top-35" year. (There is a time-delay in this recalculation; it does not happen as soon as the year ends).
    – Dilip Sarwate
    May 19, 2015 at 15:57
  • So, if the current year can replace the lowest on the 35/high list it will do it, in effect, one will always have a currest 'high 35' running list. I got that right?
    – JTP - Apologise to Monica ♦
    May 19, 2015 at 18:21
  • Yes, that is correct. It is possible fro somebody nearing Full retirement age can get a boost in the benefit because that last year of work replaces an year early in their career, maybe even one where they only worked part time.
    – mhoran_psprep
    May 19, 2015 at 18:23
  • You might edit in - the 40 quarters is the minimum to qualify for benefits. Once that's reached, your 35 year average is how the actual benefit is calculated.
    – JTP - Apologise to Monica ♦
    May 19, 2015 at 18:30
  • I added the changes requested
    – mhoran_psprep
    May 19, 2015 at 18:46

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