Average Indexed Monthly Earnings (AIME)

What Are Average Indexed Monthly Earnings (AIME)?

Average indexed monthly earnings (AIME) are used to calculate the primary insurance amount (PIA), which is used to determine an individual's Social Security benefits. AIME works by taking into consideration the 35 years that represent an individual's top earnings. Those top-earning years are then indexed to factor in wage growth and averaged to produce a monthly figure.

More simply stated, AIME attempts to approximate a lifetime of earnings using today's wage levels as a benchmark.

Key Takeaways

  • Average indexed monthly earnings (AIME) are used to calculate a person's Social Security benefits.
  • Up to 35 years of earnings are used to compute average indexed monthly earnings (AIME).
  • A person's wages up to the age of 60 are indexed or adjusted to account for changes in inflation and the cost of living.
  • Wages earned after age 60 are taken at face value without being indexed.
  • In calculating primary insurance amounts, AIME is split into three parts, which are then computed into a total monthly benefit.

Understanding Average Indexed Monthly Earnings (AIME)

In order to calculate the PIA, the average indexed monthly earnings (AIME) is split into three parts. Predetermined percentages are applied to each part, and they are all summed together to get the PIA. If someone receives Social Security benefits, the number they use to calculate that benefit is from the primary insurance amount (PIA).

For example, for 2021, if the individual's AIME is $6,500, the PIA calculation would take 90% of the first $996. It would then take 32% from earnings over $996 (but under $6,002) and then take 15% of all monthly earnings over $6,002. In this case, the PIA would be $2,573 (as the SSA rounds down to the lowest multiple of $0.10).

AIME Calculation

The Social Security Administration (SSA) uses the PIA calculation because of Title II of the Social Security Act, under the 1978 New Start Method. Each calendar year, each covered worker with wages up to the Social Security wage base (SSWB) is recorded. The calculation for Social Security benefits starts by looking at how long you worked and how much you made each year during your 35 highest-earning years.

1. Start With a List of Your Earnings Each Year

Earnings history is shown on a Social Security statement, which is available online. Only earnings below a specified annual limit are included. This annual limit of included wages is called the contribution and benefit base.

2. Adjust Each Year of Earnings for Wage Inflation

Social Security uses a two-step process called wage indexing to determine how to adjust earnings history for wage growth:

  • Each year, Social Security publishes the national average wages for the year, a list that's available on the National Average Wage Index page.
  • Wages are indexed to the average wages for the year the recipient turns 60. For each previous year, divide the average wages of the indexing year (the year the recipient turned 60) by the national average wage for the year being indexed. Then, the recipient's wages are multiplied by this number to produce their indexed wage.
  • If the prospective recipient continued to work after age 60, wages for those years are not indexed. They are taken at face value.

For someone under age 62, the calculation will only be an estimate. Until average wages for the year someone turns 60 is known, there is no way to do an exact calculation. However, it is possible to attribute an assumed inflation rate to estimate the average wages.

3. Use the Highest 35 Years of Indexed Earnings to Calculate the Monthly Average

The Social Security benefits calculation uses the highest 35 years of someone's earnings to calculate their average monthly earnings. If someone doesn't have 35 years of earnings, a zero will be used in the calculation, which will lower the average. Total the highest 35 years of indexed earnings and divide this total by 420 (the number of months in a 35-year work history). The result is a person's AIME.

Correction—Jan. 30, 2022: A previous version misstated how wages are indexed in AIME calculations.

Correction—Feb. 16, 2022: A previous version of this article misstated the process in which wages are indexed in calculating AIME.

Article Sources
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  1. Social Security Administration. "Social Security Benefit Amounts." Accessed Jan. 30, 2022.

  2. Social Security Administration. "Indexing Factors for Earnings." Accessed Jan. 30, 2022.

  3. Social Security Administration. "National Average Wage Index." Accessed Jan. 30, 2022.

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