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We illustrate the calculation of retirement benefits using two examples, labeled
case A and case B. In each case, the worker retires in 2010.
Case A, born in 1948, retires at age 62. Case B, born in 1944, retires at his
normal (or full) retirement age.
In each case, we assume the worker has covered earnings from 1970 through
2009, as shown at right in columns labeled "nominal earnings."
Indexing brings nominal earnings up to near-current wage levels. For each case,
the table shows columns of earnings before and after indexing. Between these
columns is a column showing the indexing
factors. A factor will always equal one for the year in which the person
attains age 60 and all later years. The indexing factor for a prior year
Y is the result of dividing the average wage
index for the year in which the person attains age 60 by the average wage
index for year Y. For example, the case-A indexing factor for 1970
is the average wage for 2008 ($41,334.97) divided by the average wage for
1970 ($6,186.24).
We use the highest 35 years of indexed earnings in a benefit computation.
The dropped indexed amounts are shown in red. Below the indexed
earnings are the sums for the highest 35 years of indexed earnings and
the corresponding average monthly amounts of such earnings.
(The average is the result of dividing the sum of the 35 highest
amounts by the number of months in 35 years.) Such an average
is called an "average indexed monthly earnings" (AIME).
The next step is to calculate
benefits based on AIME amounts.
NEXT |
Earnings before and after indexing
| Year |
Case A, born in 1948 |
Case B, born in 1944 |
Nominal
earnings |
Indexing
factor |
Indexed
earnings |
Nominal
earnings |
Indexing
factor |
Indexed
earnings |
| 1970 |
$5,784 | 6.6818 | $38,647 |
$7,800 | 5.7626 | $44,948 |
| 1971 |
6,094 | 6.3621 | 38,771 |
7,800 | 5.4869 | 42,797 |
| 1972 |
6,712 | 5.7942 | 38,891 |
9,000 | 4.9971 | 44,974 |
| 1973 |
7,155 | 5.4530 | 39,017 |
10,800 | 4.7029 | 50,791 |
| 1974 |
7,603 | 5.1471 | 39,133 |
13,200 | 4.4390 | 58,595 |
| 1975 |
8,197 | 4.7892 | 39,257 |
14,100 | 4.1303 | 58,238 |
| 1976 |
8,790 | 4.4800 | 39,380 |
15,300 | 3.8637 | 59,115 |
| 1977 |
9,346 | 4.2267 | 39,503 |
16,500 | 3.6453 | 60,147 |
| 1978 |
10,119 | 3.9158 | 39,624 |
17,700 | 3.3771 | 59,774 |
| 1979 |
11,038 | 3.6008 | 39,745 |
22,900 | 3.1054 | 71,114 |
| 1980 |
12,069 | 3.3032 | 39,867 |
25,900 | 2.8488 | 73,784 |
| 1981 |
13,325 | 3.0011 | 39,990 |
29,700 | 2.5883 | 76,872 |
| 1982 |
14,101 | 2.8445 | 40,111 |
32,400 | 2.4532 | 79,484 |
| 1983 |
14,833 | 2.7124 | 40,233 |
35,700 | 2.3393 | 83,512 |
| 1984 |
15,752 | 2.5618 | 40,354 |
37,800 | 2.2094 | 83,515 |
| 1985 |
16,473 | 2.4571 | 40,476 |
39,600 | 2.1191 | 83,916 |
| 1986 |
17,013 | 2.3863 | 40,598 |
42,000 | 2.0580 | 86,437 |
| 1987 |
18,152 | 2.2432 | 40,719 |
43,800 | 1.9346 | 84,737 |
| 1988 |
19,104 | 2.1379 | 40,843 |
45,000 | 1.8438 | 82,972 |
| 1989 |
19,919 | 2.0565 | 40,964 |
48,000 | 1.7736 | 85,133 |
| 1990 |
20,901 | 1.9657 | 41,085 |
51,300 | 1.6953 | 86,968 |
| 1991 |
21,744 | 1.8951 | 41,207 |
53,400 | 1.6344 | 87,276 |
| 1992 |
22,932 | 1.8022 | 41,329 |
55,500 | 1.5543 | 86,264 |
| 1993 |
23,198 | 1.7869 | 41,452 |
57,600 | 1.5410 | 88,764 |
| 1994 |
23,891 | 1.7402 | 41,574 |
60,600 | 1.5008 | 90,947 |
| 1995 |
24,921 | 1.6731 | 41,695 |
61,200 | 1.4429 | 88,307 |
| 1996 |
26,216 | 1.5951 | 41,817 |
62,700 | 1.3757 | 86,253 |
| 1997 |
27,827 | 1.5071 | 41,939 |
65,400 | 1.2998 | 85,007 |
| 1998 |
29,368 | 1.4322 | 42,060 |
68,400 | 1.2352 | 84,485 |
| 1999 |
31,095 | 1.3566 | 42,183 |
72,600 | 1.1700 | 84,939 |
| 2000 |
32,909 | 1.2855 | 42,304 |
76,200 | 1.1087 | 84,479 |
| 2001 |
33,791 | 1.2555 | 42,426 |
80,400 | 1.0828 | 87,059 |
| 2002 |
34,228 | 1.2431 | 42,548 |
84,900 | 1.0721 | 91,019 |
| 2003 |
35,166 | 1.2134 | 42,671 |
87,000 | 1.0465 | 91,044 |
| 2004 |
36,905 | 1.1595 | 42,792 |
87,900 | 1.0000 | 87,900 |
| 2005 |
38,365 | 1.1186 | 42,914 |
90,000 | 1.0000 | 90,000 |
| 2006 |
40,242 | 1.0694 | 43,036 |
94,200 | 1.0000 | 94,200 |
| 2007 |
42,187 | 1.0230 | 43,157 |
97,500 | 1.0000 | 97,500 |
| 2008 |
43,280 | 1.0000 | 43,280 |
102,000 | 1.0000 | 102,000 |
| 2009 |
44,144 | 1.0000 | 44,144 |
106,800 | 1.0000 | 106,800 |
| Highest-35 total |
1,447,278 | Highest-35 total |
2,929,962 |
| AIME | 3,445 |
AIME | 6,976 |
Note: Nominal earnings for case B
are limited by the contribution and benefit base
for all years. Case B is an example of a person who has earned at or above
the maximum taxable amount in each year. |
www.socialsecurity.gov
