How is your Social Security benefit calculated? AIME, bend points, and PIA explained Answer in under 100 words.

How the calculation works

Step 1 — Build the AIME. Select the years of highest indexed earnings as computation years (an unindexed year can still be a high year), add those earnings, divide by the divisor months, and round the AIME down to the nearest whole dollar.

Step 2 — Apply bend points. Take 90% of the AIME through the first bend point, plus 32% of the portion through the second bend point, plus 15% of the AIME above the second bend point. Bend points are adjusted each year as average wages rise or decline.

Step 3 — Get the RAW PIA. Round to the lower dime — or to the higher dime for benchmark years before 1983.

Step 4 — Add COLAs. Applicable cost-of-living adjustments are added from the year of eligibility through the month of entitlement.

POMS worked example: Lorraine Staley, benchmark year 1979, AIME $682 → 90% × $180 = $162.00; 32% × ($682 − $180) = $160.64; basic PIA $322.70; after COL increases each June from 1979–1982, her September 1982 payment PIA was $484.30.

Formula factors & bend points

A different set of bend points is established each year, so the benchmark year determines which pair applies.

Exceptions & edge cases

• Benchmark years before 1983: the raw PIA is rounded to the higher dime rather than the lower dime.
• Annual adjustment: bend points move yearly with average wages, so the dollar thresholds differ by benchmark year.
• Unindexed years: a year falling after the indexing year can still rank among the highest computation years used for the AIME.
• COLA window: COLAs run from the year of eligibility through the month of entitlement — later increases are not part of this initial computation.