Average indexed monthly earnings (AIME) are utilized to compute the primary insurance amount (PIA), which helps in figuring out a person’s Social Security benefits. AIME considers the 35 years that reflect a person’s highest earnings. These peak earning years are indexed to account for wage growth and then averaged to create a monthly amount.
In simpler terms, AIME aims to estimate a lifetime of earnings based on current wage levels as a reference.
Learn more about Average Indexed Monthly Earning
To figure out the PIA, we break down the average indexed monthly earnings (AIME) into three sections. We apply specific percentages to each section and then add them all up to get the PIA. When someone gets Social Security benefits, the figure used to determine that benefit comes from the primary insurance amount (PIA).
For instance, in 2024, if a person’s AIME is $7,500, the PIA calculation would take 90% of the first $1,174. Then, it would take 32% of the earnings that are over $1,174 (up to $7,078) and finally, 15% of any monthly earnings that exceed $7,078. In this scenario, the PIA would total $3,009.10 (since the SSA rounds down to the nearest $0.10).
How do you figure out your Average Indexed Monthly Earnings (AIME)?
To figure out AIME, you need earnings from up to 35 years. They pick the years with the highest indexed earnings. Then, they total those earnings and divide by the total number of months in those years. Finally, the result is rounded down to the nearest dollar.
The Example
- Total of top 35 years indexed earnings: $1,750,000
- Divide by 420 months = $4,166.67
- AIME = $4,166 (rounded down).
Conclusion
The average indexed monthly earnings (AIME) is a formula used in the U.S. to figure out how much someone will get for their Social Security retirement benefits. It works by adjusting a person’s past earnings for inflation, picking out their best earning years, and then calculating the average on a monthly scale. AIME is crucial for deciding the amount of Social Security benefits a person can receive, with higher AIME numbers resulting in bigger benefits.