Primary Insurance Amount - PIA
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.
Investopedia explains '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.