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. Indexed Earnings

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

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

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

    The monetary benefits received by retired workers who have paid ...
  5. Average Price

    1. A representative measure of a range of prices that is calculated ...
  6. National Average Wage Index - NAWI

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

    Delaying Social Security Can Add Up

    The age you start collecting Social Security benefits significantly affects how much you will get each month. Do the math before deciding when to file.
  2. Retirement

    Top 6 Myths About Social Security Benefits

    Misinformation on retirement benefits is common. We'll set the record straight.
  3. Financial Advisor

    How Working Longer Impacts Social Security

    A look at the impact of working longer on Social Security retirement benefits.
  4. 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.
  5. 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.
  6. Retirement

    The Impact Of Your Starting Age On Social Security

    Retiring at 62 sounds nice, but it could affect the amount of social security you receive.
  7. 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.
  8. Retirement

    Is Your Social Security Check Less Than You Thought?

    If you're counting on your Social Security check to cover financial gaps in retirement, you may be in for a shock if your benefits are less than expected.
  9. Financial Advisor

    10 Things You Need to Know About Social Security

    Every saver should know these ten things about Social Security retirement benefits.
RELATED FAQS
  1. 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 >>
Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center