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primary insurance amount

Social Security: Average Indexed Monthly Earnings (AIME) Explanation

What is the AIME? Your Average Indexed Monthly Earnings. Why is it important? It’s the basis for your Primary Insurance Amount (PIA).

Social Security’s PIA – What is this?

Do you know what PIA means, with regard to Social Security? It’s a very important number, the basis of many if not all important calculations.

Social Security Bend Points Explained

How are bend points determined for Social Security benefits? It’s a long history, but once you know how, it all makes sense.

Windfall Elimination Provision (WEP) for Social Security

WEP (Windfall Elimination Provision) can cause a substantial decrease in your Social Security benefit. This article explains WEP to help you understand it.

The Primary Insurance Amount (PIA)

Do you know how the Primary Insurance Amount is used to calculate your Social Security benefit? Or how the PIA is calculated itself?

Why is there WEP (Windfall Elimination Provision) in Social Security?

WEP, or the Windfall Elimination Provision, is vexing to many folks. Why does WEP even exist? This article explains why.

Should I Use IRA Funds or Social Security at Age 62?

Image via Wikipedia Folks who have retired or are preparing to retire before the Social Security Full Retirement Age (FRA) face a dilemma if they have IRA assets available. Specifically, is it better to take an income from the IRA account during the years prior to FRA (or age 70) in order to receive a larger Social Security benefit; or should you preserve IRA assets by taking the reduced Social Security benefits at age 62? At face value, given the nature of IRA assets, it seems like the best thing to do is to preserve the IRA’s tax-deferral on those assets, even though it means that your Social Security benefit will be reduced. If you look at the taxation of Social Security benefits though, you might discover that delaying receipt of your Social Security will provide a much more tax effective income later in life. In the tables below I’ll […]

Calculating the Social Security Retirement Benefit

Do you know the process for calculating the Social Security retirement benefit? It’s a bit complicated, but it’s useful to understand.

Social Security Bend Points for 2016

When the Social Security Administration recently announced that the maximum wage base and the Cost-of-Living Adjustment (COLA) would remain unchanged for 2016, they also announced the bend points that are used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits. In addition, the Family Maximum Benefit (FMax) bend points for 2016 were also announced. Wait a second! You may be wondering just why the bend points are changing when there was no increase to the COLA? Excellent question, as it shows you’ve been paying attention. This is because the bend points are based upon the Average Wage Index, which adjusts annually regardless of whether the numbers go up or down, whereas the COLA and the maximum wage base only goes up. Bend points can go down from one year to the next – it’s only happened once, in 2009, but it could happen again. For more on […]

Will Work After Retirement Age Increase My Social Security Benefit?

This question comes up every once in a while: Will work after retirement age increase my Social Security benefit due to the additional earnings going on my record? The answer, as with many of these calculation-type questions, is a fully-qualified “maybe”. The amount of your earnings from work in any year may have a positive impact on your benefit – not just work after retirement age. On the downside, depending upon your benefit amount it may not be much of an increase. The reason it’s not certain whether work after retirement age will increase your benefit is because of the nature of the calculations involved. If you’ll recall from the article on calculation of your Primary Insurance Amount (PIA) – the foundation of this calculation is a figure called your Average Indexed Monthly Earnings, or AIME. The AIME is an average of the 35 highest indexed earnings years in your […]

How to Compute Your Monthly Social Security Benefit

So you’ve seen your statement from Social Security, showing what your benefit might be at various stages in your life.  But not everyone files for benefits at exactly age 62 or 66 – quite often there are months or years that pass before you actually file.  This article will show you how to compute your monthly Social Security benefit, no matter when you file. Computing your monthly Social Security benefit First of all, in order to compute your monthly Social Security benefit, you need to know two things: your Primary Insurance Amount (PIA) and your Full Retirement Age (FRA).  The PIA is rather complicated to define, but for a shorthand version of this figure, you might use the figure that is on your statement from Social Security as payable to you on your Full Retirement Age (or “normal” retirement age).  

Social Security Bend Points for 2014

When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2014, this also allowed for calculation of the bend points for 2014. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series.  They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA.  Here, however, we’ll go over how Bend Points are calculated each year.  To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis.  According to the AWI Series, in […]

How Your Average Indexed Monthly Earnings is Determined

In order to calculate your Social Security benefit you need to know what your PIA (Primary Insurance Amount) is.  In order to calculate the PIA, you need to know what your Average Indexed Monthly Earnings (AIME) factor is.  So how is your AIME determined? During your working career, your Social Security-covered earnings were reported to the Social Security Administration.  When you reach age 60, an index factor is applied to each year of your earnings in order to adjust each year’s earnings for inflation.  After the index factor is applied, the top 35 years of earnings are totaled and then divided by 420 (the number of months in 35 years).  This produces an average… indexed… monthly… earnings… factor. If you haven’t had a full 35 years of Social Security-covered earnings, the AIME is still calculated using 35 years as the divisor.  This can result in a much lower benefit as […]

Computing Your Social Security Monthly Benefit

When planning for Social Security retirement benefits, it is important to know how to compute the amount of your benefit at various ages.  The amount of your benefit will be different depending upon your age when you begin drawing the benefit, as well as your record of earnings over time. Below are the factors that are needed in order to determine the amount of your Social Security benefit: Your Primary Insurance Amount, or PIA Your Full Retirement Age, or FRA, which is determined by your year of birth Your age when you will begin drawing benefits Whether or not the Windfall Elimination Provision (WEP) applies to your benefits This earlier article has information about the PIA, and you can find your PIA on your Social Security statement.  Your FRA, if you were born between 1943 and 1954, is 66.  If you were born in 1955 or after, FRA gradually increases […]

A Quick and Dirty Way to Determine Your PIA

We’ve gone over the long, painful, detailed way to calculate the Primary Insurance Amount (PIA) in many different articles and my book.  The PIA is central to most of the calculations we do, such as your own benefit (reduced or increased if you file early or late), survivor benefits, and the like. Sometimes it is difficult to actually know find out what your PIA actually is.  Here’s a quick and dirty way to figure it out: Go to the Social Security website and get your statement (  On page 2 at the top you’ll see either your Full Retirement Age (FRA) benefit amount, or the amount at your current age if you’re over FRA.  Oftentimes we refer to this FRA amount as your PIA, but nearly always with a qualification.  This is because the benefit amount illustrated on this statement is assuming that you continue earning at your current level […]

Calculating the PIA

WOMEN’S HISTORY MONTH (Photo credit: mademoiselle louise) In determining your retirement benefits from Social Security, as well as those of any dependents who may claim benefits based upon your record, the Primary Insurance Amount, or PIA, is an important factor.  The PIA is the amount of benefit that you would receive if you began receiving benefits at exactly your Full Retirement Age, or FRA. (see this article for information about determining your FRA). The PIA is only one of the factors used in determining the actual amount of your retirement benefit – the other factor being the date (or rather your age) when you elect to begin receiving retirement benefits. So, how is PIA calculated? There are several factors that go into the calculation of the PIA.  You start off with your Average Indexed Monthly Earnings (AIME – which we defined in this article about the AIME).  Then, we take […]