Primary Insurance Amount - PIA

AAA

DEFINITION of 'Primary Insurance Amount - PIA'

A calculation, used in conjunction with the Average Indexed Monthly Earnings (AIME), to determine a person's social security benefits. The Primary Insurance Amount (PIA) is the second step in determining the monthly retirement benefits and is calculated simply by making adjustments to the AIME.

BREAKING DOWN 'Primary Insurance Amount - PIA'

The AIME is is an average of the workers average lifetime earnings indexed for wage growth. The Primary Insurance Amount is found by splitting the AIME into three segments and multiplying specific percentages to each segment and summing up all the parts.

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. Average Indexed Monthly Earnings ...

    A calculation used to determine the Primary Insurance Amount ...
  2. Social Security Number - SSN

    A nine-digit number assigned to citizens, some temporary residents ...
  3. Social Security

    A United States federal program of social insurance and benefits ...
  4. Solvency

    The ability of a company to meet its long-term financial obligations. ...
  5. Phases Of Retirement

    A six-stage process described by researcher Robert Atchley that ...
  6. Social Security Administration ...

    A U.S. government agency created in 1935 by President Franklin ...
Related Articles
  1. Retirement

    Will Your Retirement Income Be Enough?

    Find out how to determine whether you're on the path to a comfortable retirement, or financial ruin.
  2. Taxes

    Avoid The Social Security Tax Trap

    Government benefits can cost you big money! Know the income thresholds before you file.
  3. Retirement

    Introduction To Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  4. Options & Futures

    Can You Retire In Five Years?

    The countdown is on. Find out whether you'll be ready to leave the working world.
  5. Insurance

    Who is a Beneficiary?

    A beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
  6. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  7. Professionals

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  8. Stock Analysis

    How MetLife Became a Global Insurance Giant

    MetLife is the largest life insurer in the United States. Here's how it has managed to stay on top.
  9. Insurance

    Understanding Co-Insurance

    Co-insurance is a cost-sharing agreement between an insurer and an insured party.
  10. Insurance

    What Does Errors and Omissions Insurance Cover?

    Errors and omissions insurance protects companies and individuals against claims made by clients for inadequate work or negligent actions.
RELATED FAQS
  1. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  2. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  3. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  4. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  5. Is it more important to have a low deductible or a low premium?

    The choice between a low deductible or a low premium is a personal one. There is no right or wrong arrangement, but there ... Read Full Answer >>
  6. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!