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The Importance of 35 in Social Security Planning

If I’ve answered the question once, I’ve answered it 35 times! Many clients are under the misconception that their Social Security benefit amount is based on their last 5 years of employment. In truth, the monthly amount received is based on the average of the highest 35 years of a worker’s employment. So a worker who makes less money or works part-time during the five years prior to the day he or she claims Social Security benefits does not necessarily reduce lifetime benefits.

How does the Social Security Administration (SSA) calculate benefits? It averages a worker’s lifetime earnings over 35 years, taking indexed inflation into account for earnings in the past. One incentive for a person nearing retirement to work longer might be if he or she has fewer than 35 covered years. If earnings during any year are zero, that zero becomes part of the average and reduces a worker’s retirement benefit. To calculate the benefit amount it will pay, the SSA applies a formula to a worker’s earnings and arrives at the basic benefit or “primary insurance amount.” This amount is how much the worker will receive at full retirement age—65 or older, depending on date of birth. Workers can claim Social Security retirement benefits as young as age 62, but the benefits are permanently reduced as a result. Many retirees who have little or no retirement savings or who are in poor health may need to claim benefits at 62, but financial planners should help clients evaluate if delaying their claim nearer to or at full retirement age makes more financial sense than claiming right at age 62.

The upshot of these facts for financial planning is to make sure that your clients don’t feel as if they “have” to keep working at a job they hate because of the worry that taking a lower-paying or part-time job will substantially reduce their Social Security benefit. There may be other compelling reasons for a client to stay in that particular job or keep working full-time, but it can be a deciding factor to know that Social Security is not one of them.


Social Security Administration. “Your Retirement Benefit: How It’s Figured.” 2015.

By Kathryn Hauer - writing for the Starks Boot Camp™ Review for the CFP® Exam|CFP® Exam Information – Retirement and Social Security

Kathryn Hauer, a Certified Financial Planner™, financial advisor, and tax pro, is an educator who writes about financial literacy.  Her books, available in English and Spanish, discuss basic concepts of money including insurance and taxes, financial traps to avoid, how to pay for college and tech school, and the bright future ahead for blue collar careers. Her DIY financial plan guide helps you create your own financial plan in 11 easy steps. Learn more about ways to improve your financial health and safety at her website.

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