Average Indexed Monthly Earnings (AIME): Meaning and Overview

What Are Average Indexed Monthly Earnings (AIME)?

Average indexed monthly earnings (AIME) are used to calculate the primary insurance amount (PIA), which is used to determine an individual's Social Security benefits. AIME works by taking into consideration the 35 years that represent an individual's top earnings. Those top-earning years are then indexed to factor in wage growth and averaged to produce a monthly figure.

More simply stated, AIME attempts to approximate a lifetime of earnings using today's wage levels as a benchmark.

Understanding Average Indexed Monthly Earnings (AIME)

In order to calculate the PIA, the average indexed monthly earnings (AIME) is split into three parts. Predetermined percentages are applied to each part, and they are all summed together to get the PIA. If someone receives Social Security benefits, the number they use to calculate that benefit is from the primary insurance amount (PIA).

For example, for 2024, if the individual's AIME is $7,500, the PIA calculation would take 90% of the first $1,174. It would then take 32% of earnings over $1,174 (and through $7,078) and then take 15% of all monthly earnings over $7,078. In this case, the PIA would be $3,009.10 (as the SSA rounds down to the lowest multiple of $0.10).

AIME Calculation

The Social Security Administration (SSA) uses the PIA calculation because of Title II of the Social Security Act, under the 1978 New Start Method. Each calendar year, each covered worker with wages up to the Social Security wage base (SSWB) is recorded. The calculation for Social Security benefits starts by looking at how long you worked and how much you made each year during your 35 highest-earning years.

1. Start With a List of Your Earnings Each Year

Earnings history is shown on a Social Security statement, which is available online. Only earnings below a specified annual limit are included. This annual limit of included wages is called the contribution and benefit base.

2. Adjust Each Year of Earnings for Wage Inflation

Social Security uses a two-step process called wage indexing to determine how to adjust earnings history for wage growth:

• Each year, Social Security publishes the national average wages for the year, a list that's available on the National Average Wage Index page.
• Wages are indexed to the first year a recipient is eligible to receive benefits. For retirement, eligibility is at age 62.
• A recipient's earnings are indexed to the average wage level two years prior to the first year of eligibility. So, for example, if an individual is first eligible in 2024 when they turn 62, then the earnings would be indexed to the average wage index of 2022.
• "Earnings in a year before 2022 would be multiplied by the ratio of 63,795.13 to the average wage index for that year; earnings in 2022 or later would be taken at face value."

3. Use the Highest 35 Years of Indexed Earnings to Calculate the Monthly Average

The Social Security benefits calculation uses the highest 35 years of someone's earnings to calculate their average monthly earnings. If someone doesn't have 35 years of earnings, a zero will be used in the calculation, which will lower the average. Total the highest 35 years of indexed earnings and divide this total by 420 (the number of months in a 35-year work history). The result is a person's AIME.

How to Improve Your AIME

The ultimate goal for prospective retirees is to maximize their AIME as the higher your AIME calculation, the higher your retirement benefits. Here are several ways you can increase your calculation.

• Work More Years. The AIME is based on your highest-earning 35 years of work. If you haven't yet accumulated 35 years of substantial earnings, you can consider continuing to work until you've accumulated the maximum amount of years that are considered.
• Increase Your Income. Actively seek opportunities for higher-paying jobs within your industry or field. This might involve job changes, promotions, or acquiring skills that make you more valuable to employers. Because the AIME is based on your highest-earning years, you will earn greater benefits by increasing your increase throughout your career.
• Work Full-Time. While part-time or gig work may offer flexibility, it often results in lower earnings. To improve your AIME, consider work full-time throughout your career as a natural way to increase how much you've earned each year.
• Maximize Earnings Early. The AIME calculation is progressive, meaning it counts lower-earning years less than higher-earning ones. Concentrate on maximizing your income in the early years of your career, as these earnings will have a lasting impact on your AIME. In addition, under the assumption of steady career growth, your "lowest" earning years may still be a suitably high platform to grow off of.
• Delay Retirement. If you can afford to delay retirement and continue working, you can accumulate more high-earning years on the back-end. This not only boosts your AIME but can also result in larger Social Security benefits when you do decide to retire. If you delay claiming benefits beyond your full retirement age, your monthly benefit increases until you reach age 70.

The Bottom Line

The average indexed monthly earnings is a calculation used in the United States to determine an individual's Social Security retirement benefit amount. It is computed by indexing a person's historical earnings over their working years to account for inflation, selecting the highest-earning years, and then averaging them on a monthly basis. AIME serves as the basis for determining how much a person is eligible to receive in Social Security benefits with higher AIME values leading to higher benefits.

Correction—Jan. 30, 2022: A previous version misstated how wages are indexed in AIME calculations.

Correction—Feb. 16, 2022: A previous version of this article misstated the process in which wages are indexed in calculating AIME.