Primary Insurance Amount: What it is, Calculations, and Examples

What Is the Primary Insurance Amount (PIA)?

The primary insurance amount (PIA) is the result of a calculation used to determine the Social Security benefits amount that would be paid out to an eligible retiree at full retirement age.

Key Takeaways

  • The primary insurance amount (PIA) is the amount of Social Security benefits paid to a retiree at full retirement age.
  • The average indexed monthly earnings (AIME) must first be calculated before the PIA can be determined.
  • The government takes three percentages of the AIME—fixed at 90%, 32%, and 15%—to calculate the PIA.
  • For 2022, the PIA calculation takes 90% from the first $1,024, 32% from earnings over $1,024 but under $6,172, and 15% of monthly earnings over $6,172. For 2023, the amounts are $1,115 and $6,721.

Understanding the Primary Insurance Amount (PIA)

The primary insurance amount cannot be determined until after calculating the average indexed monthly earnings (AIME). The AIME is calculated by taking up to 35 years of the highest earnings of a beneficiary's life and and dividing them by the total number of months in each year.

These wages are indexed against the national average salary from two years prior. This is done to give a fair view of the history of wage growth and to estimate how benefits should increase to cover that growth over the life of the retiree.

Once the AIME has been adjusted to show this range, the PIA calculation can be completed. The government takes three different percentages of the AIME and adds them together. The percentages are fixed at 90%, 32%, and 15%, however, the dollar amounts used in the calculation change each year.

These dollar amounts are called bend points and can be found on the Social Security Administration’s website along with the table for eligible retirement ages and maximum family benefit formulas. 

Example of the Primary Insurance Amount (PIA)

An eligible retiree would determine their full retirement age based on the year they were born. Assume that a person born in 1953 would retire at age 66. To calculate their AIME, they would first write down their earnings from each working year, and then pull out the 35 highest-earning years.

From there, the calculation can be completed by adding the 35 annual salaries together and then dividing that sum by 420, which is the number of months in 35 years. Using this retiree’s information as an example, we estimated a combined total sum of $1,575,000. This accounts for an annual salary of $45,000 for 35 years, divided by 420 months, which equals an AIME of $3,750 a month. Using this number, the calculation for the PIA can now be completed.

For 2022, the PIA calculation takes 90% from the first $1,024, 32% from earnings over $1,024 but under $6,172, and 15% of monthly earnings over $6,172. In this example, the PIA would be $1,793 after being rounded down to the nearest whole dollar.

All of these calculations are performed internally by the Social Security Administration and can be completed on their website by entering accurate earning figures and age variables. Having the knowledge of what goes into the calculation can help one better understand how the Social Security Administration obtains these figures and how much an individual's annual earnings would need to be over a lifetime in order to reach a desired monthly retirement benefit.

What Is a Spouse's Primary Insurance Amount?

If a person files for retirement benefits at their full retirement age, the primary insurance amount (PIA) is their monthly retirement benefit. The benefit for the spouse will be half the PIA. So, for example, if a retiree's monthly benefit is $1,000, the spouse's will be $500.

What Is the Maximum Social Security Benefit?

Your Social Security benefit will depend on the age you retire. If you start taking benefits early, at age 62, your benefits will be significantly lower than if you take them at your full retirement age, which is between ages 66 and 67, depending on the year you were born. If you take benefits past your full retirement age, the amount you receive will increase. So, for example, if you start taking benefits at age 62 in 2022, your maximum benefit will be $2,364, but if you retire at age 70, your maximum benefit in 2022 would be $4,194.

What Is a Good Monthly Retirement Income?

A good monthly retirement income will differ for every individual, depending on their lifestyle, their lifestyle in retirement, and their expenses. Experts recommend a retirement income equal to approximately 80% of your pre-retirement income. So if your monthly income before retirement was $2,000 a month, a good monthly retirement income would be $1,600.

Article Sources
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  1. Social Security Administration. "Primary Insurance Amount."

  2. Social Security Administration. "Benefit Calculation Examples for Workers Retiring in 2023."

  3. Social Security Administration. "Benefit Formula Bend Points."

  4. Social Security Administration. "Social Security Benefit Amounts - Average Indexed Monthly Earnings (AIME)."

  5. Social Security Administration. "Indexing Factors for Earnings."

  6. Social Security Administration. "Benefits for Spouses."

  7. Social Security Administration. "What Is the Maximum Social Security Retirement Benefit Payable?"

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