Average Indexed Monthly Earnings - AIME

DEFINITION of 'Average Indexed Monthly Earnings - AIME'

A calculation used to determine the Primary Insurance Amount (PIA) amount used to value an individuals social security benefits. The Average Indexed Monthly Earnings (AIME) takes your top 35 highest earning years up to age 60 and indexes it for wage growth, and then averages it to get a monthly amount. The AIME tries to approximate your earnings over your lifetime at today's wage levels.

BREAKING DOWN 'Average Indexed Monthly Earnings - AIME'

If you recieve Social Security benefits, the number they used to calculate that benefit is from the Primary Insurance Amount (PIA). In order to calculate the PIA, the AIME is split into three parts. Predetermined percentages are applied to each part and they are all summed together to get the PIA.

For example, suppose your AIME is $5,000. The PIA calculation would take 90% from the first $744, then 32% from earnings over $744 but under $4483, and lastly 15% of monthly earnings over $4483. In this example your PIA would be $1943.63.

RELATED TERMS
  1. Primary Insurance Amount - PIA

    A calculation, used in conjunction with the Average Indexed Monthly ...
  2. Indexed Earnings

    A worker's past wages that have been adjusted for changes in ...
  3. Covered Earnings

    The total amount of an employee's pay that is eligible for use ...
  4. Outside Earnings

    Income that temporarily reduces a retired individual's Social ...
  5. Social Security

    A United States federal program of social insurance and benefits ...
  6. National Average Wage Index - NAWI

    An index calculated annually by the Social Security Administration ...
Related Articles
  1. Financial Advisor

    How Working Longer Impacts Social Security

    A look at the impact of working longer on Social Security retirement benefits.
  2. Retirement

    11 Social Security Calculators Worth Your Time

    The safest Social Security calculators to use when figuring benefits are on the official website. The best are the ones that access your actual record.
  3. Retirement

    Can Your 401(k) Impact Your Social Security Benefits?

    Find out why income from a 401(k) does not affect the amount of your Social Security benefits, but how it can impact your annual tax bill if you earn too much.
  4. Retirement

    The 3 Best Social Security Calculators For 2016

    Find out how to analyze your Social Security benefits under different retirement scenarios using multifunctional online Social Security calculators.
  5. Financial Advisor

    Top Social Security Tips for Government Employees

    Government employees have special issues to consider when it comes to computing Social Security payouts. Here's how to navigate them.
  6. Financial Advisor

    What Will My Social Security Check Look Like?

    It's important to know what your Social Security check will look like in retirement. Here's how you can figure it out.
  7. Retirement

    How Having a Job Affects Social Security Benefits

    Social Security benefits mean a lot to retirees' finances. Having a job, even part-time, can complicate matters if certain benchmarks aren't reached.
  8. Retirement

    How Social Security Benefits Are Estimated & Taxed

    The Social Security check you'll get depends on your work history, when you start claiming a benefit and these other factors.
  9. Financial Advisor

    IRA Holders: How to Avoid this Huge Mistake

    Here's why using your IRA funds to delay taking Social Security benefits may be a good option for more financial security in retirement.
  10. Retirement

    How Social Security Works After Retirement

    Millions of Baby Boomers are looking forward to collecting benefits, but several factors can affect how much they get and whether the money is taxed.
RELATED FAQS
  1. Is there something wrong with the calculation of my SS benefits and widow's pension?

    My spouse did not work some of the years during our marriage of 37 years. How is it possible th... Read Answer >>
  2. What is the difference between early retirement and full retirement as it applies ...

    If you were born in 1929 or later, you'll need forty Social Security credits to be eligible for Social Security retirement ... Read Answer >>
  3. What is the maximum I can receive from my Social Security retirement benefit?

  4. I am coming out of retirement and I’m already getting a Social Security benefit. ...

  5. Is it better to start SS benefits at 62 or 66?

    It appears it takes 10 years to recoup money if taken at 62. In 10 years, inflation has kicked in so it may be even longer. ... Read Answer >>
  6. How are Social Security benefits affected by your income?

    Understand the relationship between a worker's earned income and benefits he or she receives from Social Security in retirement, ... Read Answer >>
Trading Center