What is the formula used to calculate Social Security benefits based on?

The formula to calculate Social Security benefits is based on a person's highest 35 years of earnings, which are indexed for inflation. This approach ensures that the calculation reflects both historical earning trends and current economic conditions. The indexing process adjusts past earnings to account for changes in national average wages, ensuring that individuals are rewarded for their work history and contribution to the Social Security system over time.

By considering a full 35 years, the calculation can take into account variations in income throughout a person's working life, allowing for a more accurate representation of their overall earning capacity. If someone has not worked for 35 years, the formula will include zeros for the years not worked, which may impact the final benefit amount. However, the choice of 35 years allows for a balance between rewarding consistent earnings and providing flexibility for those who may have gaps in their employment history.