Average Indexed Monthly Earnings (AIME)
What Are Average Indexed Monthly Earnings (AIME)?
Average indexed month to month earnings (AIME) are utilized to ascertain the primary insurance amount (PIA), which is utilized to decide a person's Social Security benefits. AIME works by thinking about the 35 years that address a singular's top earnings. Those top-procuring years are then indexed to factor in wage growth and averaged to deliver a month to month figure.
All the more basically stated, AIME endeavors to inexact a lifetime of earnings utilizing the present wage levels as a benchmark.
Figuring out Average Indexed Monthly Earnings (AIME)
To ascertain the PIA, the average indexed month to month earnings (AIME) is split into three parts. Foreordained percentages are applied to each part, and they are completely added together to get the PIA. Assuming somebody gets Social Security benefits, the number they use to work out that benefit is from the primary insurance amount (PIA).
For instance, for 2021, assuming the person's AIME is $6,500, the PIA calculation would take 90% of the first $996. It would then take 32% from earnings more than $996 (however under $6,002) and afterward take 15% of all month to month earnings more than $6,002. In this case, the PIA would be $2,573 (as the SSA adjusts down to the least numerous of $0.10).
The Social Security Administration (SSA) utilizes the PIA calculation in light of Title II of the Social Security Act, under the 1978 New Start Method. Each calendar year, each concealed worker with wages to the Social Security wage base (SSWB) is recorded. The calculation for Social Security benefits begins by taking a gander at how long you functioned and the amount you made every year during your 35 highest-procuring years.
1. Begin With a List of Your Earnings Each Year
Earnings history is displayed on a Social Security statement, which is accessible on the web. Just earnings under a predefined annual limit are incorporated. This annual limit of included wages is called the contribution and benefit base.
2. Change Each Year of Earnings for Wage Inflation
Social Security utilizes a two-step process called wage indexing to decide how to change earnings history for wage growth:
- Every year, Social Security distributes the national average wages for the year, a rundown that is accessible on the National Average Wage Index page.
- Wages are indexed to the average wages for the year the beneficiary turns 60. For each previous year, partition the average wages of the indexing year (the year the beneficiary turned 60) by the national average wage for the year being indexed. Then, at that point, the beneficiary's wages are increased by this number to deliver their indexed wage.
- Assuming that the prospective beneficiary kept on working after age 60, wages for those years are not indexed. They are fully trusted.
For somebody under age 62, the calculation may be an estimate. Until average wages for the year somebody turns 60 is known, it is basically impossible to do an exact calculation. In any case, it is feasible to ascribe an assumed inflation rate to estimate the average wages.
3. Utilize the Highest 35 Years of Indexed Earnings to Calculate the Monthly Average
The Social Security benefits calculation utilizes the highest 35 years of somebody's earnings to ascertain their average month to month earnings. On the off chance that somebody doesn't have 35 years of earnings, a zero will be utilized in the calculation, which will below average. Total the highest 35 years of indexed earnings and separation this total by 420 (the number of months in a 35-year work history). The outcome is an individual's AIME.
Remedy — Jan. 30, 2022: A previous rendition misstated how wages are indexed in AIME calculations.
Revision — Feb. 16, 2022: A previous variant of this article misstated the cycle in which wages are indexed in computing AIME.
- Average indexed month to month earnings (AIME) are utilized to compute an individual's Social Security benefits.
- In working out primary insurance amounts, AIME is split into three parts, which are then figured into a total month to month benefit.
- An individual's wages up to the age of 60 are indexed or adjusted to account for changes in inflation and the cost of living.
- As long as 35 years of earnings are utilized to process average indexed month to month earnings (AIME).
- Wages earned after age 60 are fully trusted without being indexed.