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  • Writer's pictureChris Stein, CFP®

Your Social Security Primary Insurance Amount

When it comes to Social Security, your Primary Insurance Amount (PIA) is the most important number you’ll need to know.  But what is your PIA and how is it calculated?

Your PIA is the retirement benefit that you will receive once you reach full retirement age.  If you don’t know what your PIA is, you can go online to and get a copy of your benefit statement, which will list your PIA for you.  Once you know this number, it will help you make decisions as to how and when to claim your Social Security benefit.

Where Do They Get Their Numbers?

“That’s all fine and good”, you may be thinking, “but how does the Social Security Administration (SSA) come up with this magical PIA number?”  Here’s where something called AIME comes in to play.  AIME stands for Average Indexed Monthly Earnings.  To figure out your AIME, the SSA looks at your previous 40 years of work history, prior to your turning 62 (even though you can’t collect your full SS benefit until you reach full retirement age).  The SSA then selects your 35 highest earning years and indexes these wages to adjust for wage inflation.  A dollar you earned in 1980 would buy more than a dollar you earn today, and the SSA wants to account for this.

After indexing your average monthly earnings, Social Security uses this number to determine your total PIA using a specific formula.  Of your first $816 average indexed monthly earnings, your Social Security PIA is designed to replace 90% of that amount.  For average indexed monthly earnings between $817 and $4917, your Social Security PIA will replace 32% of that amount and for average indexed monthly earnings above $4917, your Social Security PIA will replace 15%.  To calculate your total PIA, the SSA will add up all three of these percentages.

Calculating your PIA can seem a bit involved and confusing.  For additional clarification, please be sure to use the play  button below to listen to our audio blog.

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