Average Indexed Monthly Earnings

If you are approaching retirement, you might be wondering how much you will receive in Social Security benefits. Your level of benefits will depend on how much you worked and earned in your career, calculated as “average indexed monthly earnings” (AIME).

The Social Security Administration (SSA) calculates the AIME for each potential recipient using data collected from federal government income records throughout their lifetime. This calculation determines how much you should receive based on your contributions to the program through payroll taxes.

How AIME Is Calculated

The calculation used by the SSA to determine AIME brings together your earnings information across a career and indexes those earnings to a base year. In short, AIME represents your highest-earning years and uses current wage levels to adjust to a monthly sum.

Your monthly sum is calculated by selecting a base year —  the year you become eligible for Social Security by turning 60 years old — and applying a multiplier to your earnings for each year you worked, with that multiplier increasing each year going back to when you started working.

Your nominal wages are thus multiplied to approximate current earnings. This applies to your 35 highest-earning years. Once the SSA calculates your AIME, it is used to determine your primary insurance amount, which in turn leads to your benefit amount.

What You Need To Know About AIME When Considering Social Security Benefits

The calculation of AIME may seem inflexible, but there are ways you can increase it throughout your career. By forward-planning and making certain career choices, you could see your AIME and benefits increase when you begin receiving Social Security benefits.

Because AIME is calculated using your highest 35 years of earnings, you can increase it by working longer and for more money. In addition, you can aim to earn a higher income as early in your career as possible, since a higher multiplier is applied to the years furthest from your 60th birthday.

Working full-time whenever possible can also help you maximize your AIME, since full-time positions often result in higher earnings. You can also look to grade up your income as your career progresses.

Contact BurnettDriskill for Help Understanding Your AIME

You can calculate average indexed monthly earnings for yourself before you reach retirement age to get an idea of what benefits you can expect. For further information and to learn how you can maximize your benefits once the SSA calculates your AIME, contact BurnettDriskill for a free consultation.