Social Security's estimator makes one costly assumption

The retirement number looks definitive when pulled up online, and most workers nearing their 60s build a household budget around that single figure.

The Social Security Administration (SSA) plugs the most recent reported wages into every remaining year before filing, according to SSA’s research note.

The assumption works for workers who stay employed until full retirement age, but it inflates the benefit for anyone who stops earning sooner. That design means the estimate assumes continued employment at the same wage until the filing date and treats those future paychecks as money already earned.

A worker who leaves the payroll at 63 and plans to delay filing until 67 may be staring at four phantom years of salary.

When that income is removed from the calculation, the projected monthly check can drop enough to change a retirement plan.

How the SSA’s benefit formula bakes in income that may never be earned

Social Security calculates the monthly benefit from the highest 35 years of indexed earnings, known as Average Indexed Monthly Earnings.

Years when nothing was earned count as zeros in that formula, pulling the average down for workers with gaps in employment.

Marcia Mantell, a Social Security expert and founder of Mantell Retirement Consulting, told The Daily Upside in a March 2026 analysis that most planning software projects current salary through retirement age, potentially overstating benefits for anyone who leaves the workforce before full retirement age.

If you aren’t really close to your full retirement age, the numbers can get skewed and become overzealous.

For a 63-year-old earning $90,000, those projected years could lift the estimate well above what the actual earnings record supports.

Remove those projected years and the math shifts, because lower-earning years from the 20s and 30s stay in the 35-year average, the SSA reported.

A $200-per-month overestimate translates to $2,400 a year, which is roughly $60,000 over a 25-year retirement, before cost-of-living adjustments.

Also Read:Retirees face surprising problem with 401(k)s

A $4 trillion savings gap leaves no cushion for estimator surprises

The individual cost of an inflated estimate feeds into a national retirement shortfall that TIAA’s chief executive has called a defining crisis for American households.

Thasunda Brown Duckett, president and chief executive officer of TIAA, put the gap at roughly $4 trillion, reported Fortune.

The U.S. personal saving rate fell to 3% in July 2026 from 4.4% a year earlier, the Bureau of Economic Analysis (BEA) reported.

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Those thinner reserves leave households with little cushion to absorb a monthly benefit that turns out to be several hundred dollars lower than expected.

Delayed retirement credits accrue based on claiming age, not employment status, so waiting until 70 adds value without a paycheck. Those credits add roughly 8% per year for each year a worker waits past their full retirement age, according to the SSA.

What the Plan for Retirement tool shows when you zero out future income

Foundry Financial founder and certified financial planner Kevin Lum stressed in a MoneyLion analysis that when to stop working and when to claim are separate decisions that pre-retirees should not treat as one.

The SSA’s Plan for Retirement tool inside the my Social Security portal lets users adjust expected future earnings and compare benefits at different claiming ages.

Running the comparison takes 10 minutes and produces a side-by-side view that can expose the gap between the default projection and a realistic figure.

The exercise breaks down into three steps that any worker approaching retirement can complete before locking in a claiming date, Lum recommended.

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How to pressure-test the benefit estimate

The Social Security Administration’s (SSA) Plan for Retirement tool lets pre-retirees run three side-by-side scenarios that expose the gap between projected and actual benefits.

The first uses the salary the SSA currently assumes and records benefit estimates at ages 67 and 70. The second drops expected future annual income to zero, revealing the benefit that actual earnings history alone supports, Lum noted.

A third version with realistic part-time earnings models the middle ground most early filers actually land in. Comparing all three results shows how much of the current estimate depends on income the filer may never earn, the SSA’s publication on benefit determination confirmed.

The earnings history section of the portal displays each year of reported wages, and a missing year can pull the benefit down on its own.

Replacing a zero-earning year in the top 35 with one more year of covered work can raise the monthly benefit, according to SSA’s “Your Retirement Benefit: How It’s Determined.”

What pre-retirees should verify before choosing a Social Security claiming date

The benefit estimator offers a starting figure that can overstate the actual check by tens of thousands of dollars over a full retirement, Lum noted.

Duckett’s framing of the national savings shortfall suggests that most households cannot absorb even a modest monthly gap that grows year after year.

Zeroing out future income in the Plan for Retirement tool before selecting a filing age reveals what the recorded earnings will pay, Lum explained. That adjusted figure is the baseline a household budget should rest on when retirement could stretch two decades or longer, he noted.

Related: Social Security’s 2027 raise is headed for a reality check

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This story was originally published October 1, 2026 at 10:07 AM.