Social Security benefits are calculated based on your average earnings over your lifetime. The Social Security Administration (SSA) uses a formula to determine your primary insurance amount (PIA), which is the basis for calculating your monthly benefit.

The formula used to calculate Social Security benefits takes into account your average indexed monthly earnings (AIME) and applies a progressive formula to determine your PIA. The AIME is calculated by adjusting your historical earnings for inflation and selecting the highest 35 years of earnings. The PIA is then calculated based on a three-tiered formula.

The three tiers of the Social Security benefit formula are as follows:

• The first tier applies a percentage to the first portion of your AIME.
• The second tier applies a lower percentage to the second portion of your AIME.
• The third tier applies a different percentage to any remaining portion of your AIME.

The percentages used in each tier may change over time due to adjustments made by the SSA.

Yes, there are limits to Social Security benefits. The maximum benefit amount you can receive is determined by the maximum taxable earnings limit set by the SSA each year. If your earnings exceed this limit, they are not included in the calculation of your AIME.

Yes, your Social Security benefits can be reduced in certain circumstances. If you start receiving benefits before your full retirement age, your monthly benefit amount may be permanently reduced. Additionally, if you continue working while receiving benefits, your earnings may be subject to an earnings limit that can temporarily reduce your benefits.