Calculating Your Primary Insurance Amount

Just because there can be some confusion over the PIA, I am writing this particular article to help allay that confusion.  In an earlier article – Social Security’s PIA – What is this? – we worked through how PIA is calculated, I’m just giving it another treatment here, to help clarify.

Primary Insurance Amount

As you know, the PIA is based upon your Average Indexed Monthly Earnings (AIME), which is the average of your highest 35 years of earnings, indexed for inflation, and expressed as a monthly figure.  The AIME then has bend points applied in the year that you reach age 62, calculating the Primary Insurance Amount (PIA).

This PIA is the projected benefit amount that you would receive upon reaching Full Retirement Age (FRA).  The actual amount that you receive if you take your benefit at FRA would likely be different due to Cost of Living Adjustments (COLAs) that would be applied between age 62 and FRA – but the PIA is not changed.

The only way that the PIA is adjusted from the original calculation is if the projection has changed.  The projection made at your age 62 assumes that you continue working and your AIME is not changed during that period.  If you happen to have already worked your 35 years by that point and do not work after age 62, your PIA will be pretty close.  But your PIA will be adjusted if you work from age 62 to FRA and your earnings are either 1) greater than one of the other 35 years used in your AIME at age 62; or 2) being added to the AIME calculation because you didn’t have a full 35 years of earnings when the PIA was calculated at age 62.

Likewise, if you do not work from age 62 to FRA or you work for lower wages than your AIME projection assumed (and you had fewer than 35 years of earnings as of age 62), your PIA at FRA could actually be a bit lower than the original projection.

Calculating Benefits

When your actual benefits are calculated, your PIA is the starting point.  Then all COLAs are applied, if you’re older than age 62.  After this, your age when you initiated benefits is taken into account – if it was before FRA, there will be a reduction; if after FRA, an increase.  This increase or decrease is applied against the COLA-adjusted-PIA, resulting in your monthly benefit amount.

Hope this has helped to clear things up a bit.  Let me know if you have additional questions…

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • As you are probably aware, earning at the maximum and above will increase your Average Indexed Monthly Earnings (AIME) as these maximum years replace some of your earlier years when you may not have received as much in earnings (indexed). This is the reason that your PIA is increasing each year.

    I believe that the reason that the calculation is described as it is, is because SSA doesn’t know how much money you made last year until the end of the year, and your benefit is only re-set once a year, so you’re always playing catch-up from the prior years’ earnings increase to your AIME.

    Hope that helps –


  • I am 72 yoa. I began receiving my primary insurance amount at 65yoa. I have not retired and have continung working full time. My annual income always exceeds the maximum FICA amount. This will be true for 2010 also.

    At the end of each calendar year I receive an SSA statement informing me that I will receive an increased monthly benefit based on the previous calendar year’s earnings that I received. For example, today I received that statement for calendar year 2009 informing me that I will my regular monthly benefit plus the difference between what SSA paid me each month and the monthly benefit SSA should have paid me each month from January 2010 through October 2010. Subsequently, I will receive the new monthly benefit.

    What is the calculation that yields the monthly increase under these circumstances?

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