Benefit Calculation Examples for Workers Retiring in 2014
Primary Insurance Amount
The basic Social Security benefit is called the primary insurance amount (PIA).
Typically the PIA is a function of average indexed monthly earnings
We determine the PIA by applying a PIA formula
to AIME. The formula we use depends on the year of first eligibility
(the year a person attains age 62 in retirement cases).
||Formula bend points
||Formula applied to AIME
||.9(816) + .32(3694 - 816) = $1,655.36|
||.9(761) + .32(4586 - 761) + .15(8335 - 4586) = $2,471.25|
Because the worker in case A retires in 2014, and 2014 is the year in
which the worker is first eligible for benefits, the case-A PIA is the case A amount
computed above truncated to the next lower dime, or $1,655.30.
The worker in case B is first eligible in 2010 (the year case B reached age 62).
Thus the case-B PIA is the case B amount computed above truncated to the next lower
dime and increased by cost-of-living
adjustments, or COLAs, for 2010 through 2013. These
COLAs are 0.0 percent, 3.6 percent, 1.7 percent, 1.5 percent, respectively. The resulting PIA is
Benefit based on PIA and age
The amount of retirement benefits paid depends on a person's age when he or
she begins receiving benefits. We reduce benefits taken before a person's
normal (or full) retirement age
and we increase benefits
taken after normal retirement age.
We assume the worker in case A begins receiving benefits at the earliest possible
age, which is age 62. Because case A's normal retirement age is 66 years,
the benefit amount for case A is reduced for 48 months of
The $1,655.30 PIA is thus reduced to a monthly benefit of $1,241.00.
The benefit amount for case B, assuming that benefits begin exactly at normal
retirement age of 66 years, is not reduced except for rounding down to the
next lower dollar. The $2,642.60 PIA is thus reduced to a monthly benefit of
In addition to case B, we also have other benefit examples for
workers whose earnings have equalled or exceeded
maximum taxable amounts. These examples show AIME and benefit amounts for
retirement at ages 62, 65, and 70.
Two Other Methods
Two other methods for computing a PIA are described at right. Relatively few
new beneficiaries qualify for these two other methods.
Special Minimum Benefits
We pay "special minimum" benefits to certain individuals who've had long periods
of relatively low earnings. To qualify for such benefits, a person must have at
least 11 "years of coverage"
. To earn a year of
coverage, a person must earn at least a certain proportion (25 percent for years
before 1991, and 15 percent for years after 1990) of the
"old-law" contribution and benefit base
Tables showing the range of special minimum
primary insurance amounts
and corresponding maximum family benefit amounts
Old-law Benefit Tables
For persons eligible before 1979, benefits are based on average earnings rather
than average indexed earnings. We determine the PIA for such beneficiaries
from a benefit table. We update this table annually to reflect
Such benefit tables for eligibility before 1979
also called old-law benefit tables, are available beginning with the table