How to Estimate What Your Social Security Payments (Including Optimization) Will Be
In 2019, the average monthly social security benefit for retired workers was $1,471.1 This is not enough to live on, especially with inflation increasing every year while your social security payments will remain the same an. Most financial advisors agree that you'll need approximately 70 percent of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living; however, if you have average earnings, Social Security payments will only replace approximately 40 percent of that income.2
If you have a higher income, this percentage will be lower, as the payments are replacing less of your previous earnings. If you have a lower income, the percentage is higher.2
Regardless of how much you made before retirement, you will most likely have to rely on other sources of income to supplement your social security benefits. How much you will need during retirement will depend on a number of factors such as: what you plan your lifestyle will be during, how much you have from other retirement plans such as from an IRA, 401k, etc. When attempting to make estimates for your retirement planning, it is best to make sure you are optimizing your Social Security (just like what we at Sage Investment Advisors do at office in Poughkeepsie, NY).
Optimizing your Social Security?! You are probably wondering what that means. Social Security Optimization is when you are able to collect the highest payment amount you are eligible for. This can help you in retirement since this means, you may not have to come up with a lot of extra income from other sources of retirement or a savings account to fund your retirement. In order to understand how to prepare your retirement plan, calculating an estimate for your Social Security payments (using optimization) is the first step of the process.
What is the PIA Formula?
If deciding to receive benefits at the normal retirement age, the “primary insurance amount” (PIA) is the monthly benefit you would receive.3 For those eligible in 2020, your PIA is the sum of three different portions of your average indexed monthly earnings (AIME):4
90 percent of your first $960 average indexed monthly earnings
32 percent of your average indexed monthly earnings between $960 and up to $5,785
15 percent of your average indexed monthly earnings over $5,7853
To find your average indexed monthly earnings, you’ll need the years with the highest indexed earnings from 35 years of earnings, which you can find on your Social Security statement. Once you have those high-earning years, you can find the average, which is your AIME.4
How Can I Estimate My Retirement Benefits?
Once you have your AIME, you can calculate the percentages of the three different sections of your AIME and add them up, based on the PIA formula. You can also receive an estimate by creating a personal Social Security account with the Social Security Administration.
However, bear in mind that your actual benefits may look different from your estimate (you may earn more when you are able to optimize your Social Security payments). This is because laws regarding benefit amounts may change and your earnings may continue to alter over time. In addition, your benefits will be adjusted for living costs at the time you start receiving benefits.5
3 Factors That Impact Your Retirement Benefits
1. Lifetime Earnings
Since your benefits are a sum of percentages based on your earnings, higher lifetime earnings mean higher benefits, whereas lower earnings, or gaps in earnings, results in lower benefits.2
2. Age
If you opt to receive benefits before your full retirement age, your benefits will be lower. On the other hand, if you wait to receive retirement benefits until after your full retirement age, your benefits might be higher.2
3. Employment
Paying for social security looks different for those who are self-employed, work for a federal, state, or local government, or work outside of the United States.2 If you are in one of those categories, it’s important to understand how this may affect your benefits during retirement.
It is never to early to begin planning for life after retirement, especially with the grim future of Social Security continuously being discussed. This formula is a helpful tool that can help you to have a general estimate of how much you will need for your retirement benefits. Working with an experienced financial advisor will help to create accurate estimates for your retirement benefits by optimizing your Social Security payments to make sure you are receiving the maximum payments you are eligible for.
Published by Sage Investment Advisers, LLC in Poughkeepsie, NY
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June 23, 2025 Sage Investment Advisers, LLC Named 2025 Best Financial Planner in the Hudson Valley WAPPINGERS FALLS, NY — Sage Investment Advisers, LLC, a trusted and local fiduciary firm based in Wappingers Falls, is thrilled to announce they have been chosen as Best Financial Planner in the Hudson Valley for 2025 , by Hudson Valley Magazine. Sage Investment Advisers beat out many other local financial planners and advisory firms to win the title of Best Financial Planner in the Hudson Valley. The Best of the Hudson Valley is an annual competition from Hudson Valley Magazine, where locals vote for their most beloved local businesses in each category. “We are honored to be named Best Financial Planner in the Hudson Valley,” said Jerry Schuder, President of Sage Investment Advisers. “This recognition validates the daily efforts of our team, working tirelessly to guide clients in retirement planning, investment management, and wealth preservation with integrity and care.” Sage Investment Advisers serves clients throughout the Hudson Valley region, including Wappingers Falls, Poughkeepsie, and beyond, offering tailored financial strategies, retirement planning, Social Security optimization, and real estate advisory services. Sage is dedicated to providing their clients with custom financial and retirement strategies to help them plan their retirement and legacy. This latest achievement adds to their list of other prestigious awards which include: 2024 Readers’ Choice: Best Financial Advisor – Hudson Valley , awarded by Daily Voice facebook.com+15dailyvoice.com+15sageinvestmentadvisersllc.com+15 Multiple Five‑Star Wealth Manager Awards (2012–2016, 2022–2025), presented by Five Star Professional fivestarprofessional.com+2fivestarprofessional.com+2fivestarprofessional.com+2 Recognized growth as the Hudson Valley’s #1 fastest-growing wealth management firm in prior industry rankings m.facebook.com+10sageinvestmentadvisersllc.com+10fivestarprofessional.com+10 Best Financial Advisor Firm (2024-2025)-Hudson Valley, awarded by USA Today “Being part of this Hudson Valley community means everything to us,” added Vice President, Joe Guarneri. “This award reflects our clients’ confidence and the strength of our fiduciary-driven practice.” ---------------------------------------------------------------------------------------------------------------------------------------------------------- About Sage Investment Advisers, LLC Located at 1829 South Road, Wappingers Falls, NY , Sage Investment Advisers is a local fiduciary wealth management and financial planning firm. The team combines financial and investment knowledge with decades of experience to offer custom investment strategies, retirement roadmaps, Social Security optimization, college planning, and real estate advisory services—all designed to empower clients to pursue financial peace and legacy building. Contact Jerry Schuder President, Sage Investment Advisers, LLC (845) 240‑1551 info@sageinvestmentadvisersllc.com Website: sageinvestmentadvisersllc.com Sage Investment Advisers, LLC , serving as Hudson Valley’s premier fiduciary firm, is honored to be named Best Financial Planner for 2025 , and remains dedicated to helping clients build their wealth, retirements, and legacies.