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 2019. Case A, born in 1957, retires at age 62. Case B, born in 1953, retires at his normal (or full) retirement age. In each case, we assume the worker has covered earnings from 1979 through 2018, 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 1979 is the average wage for 2017 ($50,321.89) divided by the average wage for 1979 ($11,479.46).

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 1957 Case B, born in 1953
Nominal
earnings
Indexing
factor
Indexed
earnings
Nominal
earnings
Indexing
factor
Indexed
earnings
1979 $10,7334.3836$47,050 $22,9003.9103$89,546
1980 11,7374.021447,199 25,9003.587292,908
1981 12,9593.653647,347 29,7003.259196,796
1982 13,7153.463047,495 32,4003.0891100,086
1983 14,4283.302147,643 35,7002.9456105,157
1984 15,3243.118847,792 37,8002.7820105,161
1985 16,0272.991347,942 39,6002.6683105,666
1986 16,5532.905148,088 42,0002.5914108,840
1987 17,6632.731048,237 43,8002.4361106,700
1988 18,5902.602848,385 45,0002.3217104,477
1989 19,3862.503648,535 48,0002.2333107,198
1990 20,3432.393148,683 51,3002.1347109,509
1991 21,1662.307148,832 53,4002.0580109,897
1992 22,3242.194148,980 55,5001.9572108,622
1993 22,5842.175449,128 57,6001.9405111,771
1994 23,2602.118549,276 60,6001.8897114,519
1995 24,2652.036949,424 61,2001.8169111,195
1996 25,5291.941949,574 62,7001.7322108,609
1997 27,0991.834849,722 65,4001.6367107,040
1998 28,6021.743649,870 68,4001.5553106,382
1999 30,2861.651550,018 72,6001.4732106,954
2000 32,0561.565050,167 76,2001.3960106,375
2001 32,9181.528550,316 80,4001.3635109,623
2002 33,3461.513350,464 84,9001.3499114,609
2003 34,2611.477250,612 87,0001.3177114,642
2004 35,9591.411650,760 87,9001.2592110,682
2005 37,3841.361850,909 90,0001.2147109,326
2006 39,2161.301951,057 94,2001.1614109,400
2007 41,1151.245451,206 97,5001.1109108,317
2008 42,1831.217451,354 102,0001.0860110,768
2009 41,6671.236151,503 106,8001.1026117,756
2010 42,7741.207551,650 106,8001.0771115,038
2011 44,2411.170851,799 106,8001.0444111,543
2012 45,7541.135451,948 110,1001.0128111,507
2013 46,4711.121152,096 113,7001.0000113,700
2014 48,2571.082652,244 117,0001.0000117,000
2015 50,0781.046252,393 118,5001.0000118,500
2016 50,7871.034552,541 118,5001.0000118,500
2017 52,6901.000052,690 127,2001.0000127,200
2018 54,4891.000054,489 128,4001.0000128,400
Highest-35 total  1,762,687Highest-35 total  3,906,108
AIME 4,196 AIME 9,300
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.