Along with the increases to the maximum wage base and the Cost-of-Living Adjustment (COLA) announced by the Social Security Administration, the 2015 bend points used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits were announced as well. In addition, the Family Maximum Benefit (FMax) bend points for 2015 were also announced.
Primary Insurance Amount Bend Points
The bend points for calculating individuals’ Primary Insurance Amounts (PIA) for 2015 will be $826 and $4,980. These are used to calculate your PIA from your Average Indexed Monthly Earnings (AIME). The SSA indexes your lifetime earnings and takes the top 35 years, dividing by 420 (the number of months in 35 years). The bend points are then applied to determine your PIA.
An example would be – if your AIME calculates to $5,500, then
The first $826 is multiplied by 90% = $743.40
The difference between $4,980 and $826 is multiplied by 32% = $1,329.28
The excess above $4,980 is multiplied by 15% = $78
The Primary Insurance Amount (PIA) is the sum of these three – $743.40+$1,329.28+$78 = $2,150.68, rounded to $2,150.60.
Family Maximum Benefit Bend Points
When calculating the FMax benefit amount, the bend points for 2015 are now set as well. These points are $1,056, $1,524, and $1,987. These bend points are also applied to your PIA to determine the maximum amount of benefits that can be paid based upon one individual’s record – such as Spousal Benefits, Survivor Benefits, and other dependents’ benefits.
Continuing with our example from above, where we calculated the PIA for this individual to be $2,150.60,
The first $1,056 is multiplied by 150% = $1,584
The difference between $1,524 and $1,056 is multiplied by 272% = $1,272.96
The difference between $1,987 and $1,524 is multiplied by 134% = $620.42
The excess above $1,987 is multiplied by 175% = $286.30
The results are summed up ($1,584+$1,272.96+$620.42+$286.30=$3,763.68 rounded down to $3,763.60) to produce the FMax benefit amount. For the individual with the PIA of $2,150.60, the maximum amount that can be paid based upon this record is $3,763.60.
Sterling Raskie, MSFS, CFP®, ChFC®
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correction, 720 => 420! (12*35)