Editing Social Security (United States) (section)

=== Primary Insurance Amount and Monthly Benefit Amount calculations ===
{{Main|Primary Insurance Amount}}

Workers in Social Security covered employment pay [[FICA]] ([[Federal Insurance Contributions Act]]) or SECA (Self Employed Contributions Act) taxes and earn quarters of coverage if earnings are above minimum amounts specified in the law. Workers with 40 quarters of coverage (QC) are "fully insured" and eligible for retirement benefits. Retirement benefit amounts depend upon the average of the person's highest 35 years of "adjusted [for inflation]" or "indexed [for inflation]" earnings. A person's payroll-taxable earnings from earlier years are adjusted for economy-wide wage growth, using the national average wage index (AWI), and then averaged.<ref name="SSA EN-05-10070">{{cite web | title=Your Retirement Benefit: How It's Figured | url=http://www.ssa.gov/pubs/EN-05-10070.pdf | access-date=2013-10-12}}</ref> If the worker has fewer than 35 years of covered earnings, these non-contributory years are assigned zero earnings. The sum of the highest 35 years of adjusted or indexed earnings divided by 420 (35 years times 12 months per year) produces a person's [[Average Indexed Monthly Earnings]] or AIME.<ref name="SSA EN-05-10070" />

The AIME is then used to calculate the Primary Insurance Amount (PIA). For workers who turn 62 in 2024, the PIA computation formula is:

(a) 90 percent of the first $1,174 of average indexed monthly earnings, plus

(b) 32 percent of average indexed monthly earnings between $1,174 and $7,078, plus

(c) 15 percent of average indexed monthly earnings over $7,078<ref>{{cite web | url=https://www.ssa.gov/oact/COLA/piaformula.html | title=Primary Insurance Amount | publisher=Social Security Administration | access-date=2023-11-14}}</ref>

For workers who turn 62 in the future, the 90, 32, and 15 percent factors in the computation formula will remain the same but the dollar amounts in the formula (called bend points) will increase by wage growth in the national economy, as measured by the AWI. Because the AIME and the PIA calculation incorporate the AWI, Social Security benefits are said to be wage indexed. Because wages typically grow faster than prices, the PIAs for workers turning 62 in the future will tend to be higher in real terms but similar relative to average earnings in the economy at the time age 62 is attained.

Monthly benefit amounts are based on the PIA. Once the PIA is computed, it is indexed for price inflation over time. Thus, Social Security monthly benefit amounts retain their purchasing power throughout a person's retirement years.

A worker who first starts receiving a retirement benefit at the full retirement age receives a monthly benefit amount equal to 100 percent of the PIA. A worker who claims the retirement benefit before the full retirement age receives a reduced monthly benefit amount and a worker who claims at an age after the full retirement age (up to age 70) receives an increased monthly amount.<ref name="RetirementBenefits">{{Cite web | title=When to Start Receiving Retirement Benefits | url=https://www.ssa.gov/pubs/EN-05-10147.pdf | url-status=live | archive-url=https://web.archive.org/web/20210102084510/https://www.ssa.gov/pubs/EN-05-10147.pdf | archive-date=2021-01-02 | website=www.ssa.gov}}</ref>

The 90, 32, and 15 percent factors in the PIA computation lead to higher replacement rates for persons with lower career earnings. For example, a retired individual whose average earnings are below the first bend point can receive a monthly benefit at the full retirement age that equals 90 percent of the person's average monthly earnings before retirement. The table shows replacement rates for workers who turned 62 in 2013.

{| class="wikitable collapsible" cellpadding="1" cellspacing="1" style="margin:auto; margin:0 0 1em 1em; font-size:90%; float:right;"
|-
! colspan="5" style="background:#ccf; text-align:center;"|Benefit Calculations<br />Social Security Benefits vs. 35-year "Averaged" Salary<br />Percent of Average Indexed Monthly Earnings (AIME) eligible for Social Security, PIA Benefits<ref>{{cite web | title=OASDI Benefit calculations | url=http://www.ssa.gov/pubs/EN-05-10070.pdf | access-date=October 10, 2013}}</ref>
|-
|colspan=5|
----
|-
!align="right"|AIME Salary<br />per month ||Single<br />Benefits||Married<br />Benefits<sup>*</sup>||Single<br />Benefits<br />at age 62||Married<br />Benefits<sup>*</sup><br />at age 62
|-
!align right| $    791 ||90%||135%||68%||101%
|-
!align right| $  1,000 ||78%||117%||58%||88%
|-
!align right| $  2,000 ||55%||82%||41%||62%
|-
!align right| $  3,000 ||47%||71%||35%||53%
|-
!align right| $  4,000 ||43%||65%||33%||49%
|-
!align right| $  5,000 ||40%||60%||30%||45%
|-
!align right| $  6,000 ||36%||54%||27%||41%
|-
!align right| $  7,000 ||33%||50%||25%||32%
|-
!align right| $  8,000 ||31%||46%||23%||35%
|-
!align right| $  9,000 ||29%||44%||22%||33%
|-
!align right| $10,000 ||28%||42%||21%||31%
|-
!align right| $11,000 ||23%||34%||17%||26%
|-
!align right| $12,000 ||21%||32%||16%||24%
|-
!align right| $13,000 ||19%||29%||15%||22%
|-
| colspan="5" style="text-align:left;" font-size: 80% |* Married spousal benefits may be reduced or eliminated if spouse receiving a government pension. Spouse<br />still eligible for Medicare.<ref>{{cite web | title=Government Pension Offset | url=http://www.ssa.gov/pubs/EN-05-10007.pdf | url-status=live | archive-url=https://web.archive.org/web/20210103180447/https://www.ssa.gov/pubs/EN-05-10007.pdf | archive-date=2021-01-03 | website=ssa.gov}}</ref><br />Maximum percent of salary received before Medicare or tax deductions. Retirement benefits are calculated at<br />full retirement ages. Age 62 retirement benefits are assumed to be 75% of full benefits. Approximate AIME<br />salary = 90% salary. Approximation only; contact Social Security for more detailed calculations.
|}

The PIA computation formula for disabled workers parallels that for retired workers except the AIME is based on fewer years to reflect disablement before age 62. The monthly benefit amount of a disabled worker is 100 percent of PIA.

Benefits for spouses, children, and widow(er)s depend on the PIAs of a spouse or a deceased spouse. Aged spouse and divorced spouse beneficiaries can receive up to 50 percent of the PIA. Survivor benefit rates are higher and aged widow(er)s and aged surviving divorced spouses can receive 100 percent of the PIA.

Federal, state and local employees who have elected (when they could) NOT to pay FICA taxes are eligible for a reduced FICA benefits and full Medicare coverage if they have more than forty quarters of qualifying Social Security covered work. To minimize the Social Security payments to those who have not contributed to FICA for 35+ years and are eligible for federal, state and local benefits, which are usually more generous, the U.S. Congress passed the Windfall Elimination Provision (WEP).<ref>{{cite web | title=Windfall Elimination Provision | url=http://www.socialsecurity.gov/pubs/EN-05-10045.pdf | access-date=October 10, 2013}}</ref> The WEP provision does not eliminate all Social Security or Medicare eligibility if the worker has 40 quarters of qualifying income, but calculates the benefit payments by reducing the 90% multiplier in the first PIA bendpoint to 40–85% depending on the number of Years of Coverage.<ref>{{Cite web | title=Windfall Elimination Provision | url=https://www.ssa.gov/pubs/EN-05-10045.pdf | url-status=live | archive-url=https://web.archive.org/web/20210103180444/https://www.ssa.gov/pubs/EN-05-10045.pdf | archive-date=2021-01-03 | website=ssa.gov}}</ref> Foreign pensions are subject to WEP.

A special minimum benefit, based on an alternative PIA calculation, is available for some workers with long careers but low earnings. However, it is rarely higher than the regularly computed PIA and thus few workers qualify for the special minimum benefit. 32,000 individuals received the special minimum benefit in 2019.<ref>{{Cite web | title=Program Explainer: Special Minimum Benefit | url=https://www.ssa.gov/policy/docs/program-explainers/special-minimum.html | access-date=2021-07-27 | website=www.ssa.gov | language=en}}</ref>

The benefits someone is eligible for are potentially so complicated that potential retirees should consult the Social Security Administration directly for advice. Many questions are addressed and at least partially answered on many online publications and online calculators.
{{Main|Retirement Insurance Benefits}}