Office of the Chief Actuary

We illustrate the calculation of retirement benefits using two examples, labeled case A and case B. In each case, the worker retires in 2020. Case A, born in 1958, retires at age 62. Case B, born in 1954, retires at his normal (or full) retirement age. In each case, we assume the worker has covered earnings from 1980 through 2019, 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 1980 is the average wage for 2018 ($52,145.80) divided by the average wage for 1980 ($12,513.46).

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.


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Earnings before and after indexing
Year Case A, born in 1958 Case B, born in 1954
Nominal
earnings
Indexing
factor
Indexed
earnings
Nominal
earnings
Indexing
factor
Indexed
earnings
1980 $11,7004.1672$48,756 $25,0273.7145$92,963
1981 12,9183.786148,908 29,7003.3748100,232
1982 13,6733.588549,066 32,4003.1987103,638
1983 14,3833.421849,216 35,7003.0501108,889
1984 15,2773.231849,373 37,8002.8808108,893
1985 15,9773.099849,525 39,6002.7631109,417
1986 16,5023.010449,678 42,0002.6834112,703
1987 17,6092.829949,832 43,8002.5225110,487
1988 18,5332.697149,985 45,0002.4041108,186
1989 19,3262.594450,139 48,0002.3126111,003
1990 20,2812.479850,293 51,3002.2105113,397
1991 21,1012.390750,447 53,4002.1310113,798
1992 22,2562.273650,601 55,5002.0266112,478
1993 22,5162.254250,756 57,6002.0093115,738
1994 23,1902.195350,909 60,6001.9568118,584
1995 24,1932.110751,064 61,2001.8814115,142
1996 25,4522.012351,216 62,7001.7937112,464
1997 27,0181.901351,370 65,4001.6948110,840
1998 28,5171.806851,523 68,4001.6105110,159
1999 30,1961.711451,677 72,6001.5255110,751
2000 31,9611.621751,831 76,2001.4456110,151
2001 32,8211.583951,986 80,4001.4119113,514
2002 33,2481.568252,139 84,9001.3979118,678
2003 34,1611.530852,293 87,0001.3645118,711
2004 35,8541.462852,446 87,9001.3039114,611
2005 37,2751.411152,600 90,0001.2579113,207
2006 39,1021.349152,754 94,2001.2026113,283
2007 40,9961.290652,908 97,5001.1504112,162
2008 42,0611.261553,062 102,0001.1245114,700
2009 41,5471.280953,216 106,8001.1417121,936
2010 42,6521.251353,370 106,8001.1154119,121
2011 44,1151.213353,523 106,8001.0815115,502
2012 45,6231.176553,677 110,1001.0487115,465
2013 46,3381.161753,830 113,7001.0355117,736
2014 48,1201.121953,984 117,0001.0000117,000
2015 49,9361.084154,138 118,5001.0000118,500
2016 50,6441.072054,292 118,5001.0000118,500
2017 52,5411.036254,445 127,2001.0000127,200
2018 54,5991.000054,599 128,4001.0000128,400
2019 56,5571.000056,557 132,9001.0000132,900
Highest-35 total  1,826,666Highest-35 total  4,047,132
AIME 4,349 AIME 9,636
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.