Average Indexed Monthly Earnings (AIME)

AIME is built from your Social Security earnings record: the wages and net self-employment income on which you paid Social Security tax, counted only up to each year’s taxable maximum, which is $184,500 for 2026. Earnings above the cap never enter the average, and neither do investment income, pensions or IRA withdrawals.

The key date is the year you turn 62, your year of eligibility. It fixes which year’s wage index your earnings are scaled to and which bend points the benefit formula uses. From there the calculation runs in four steps.

Indexing converts old paychecks into roughly what they would be worth at wage levels near your retirement. SSA describes the goal as making sure your benefit reflects the general rise in the standard of living during your working life, so pay from your twenties is credited with the growth in average wages, not just the rise in prices.

For someone turning 62 in 2026, every year before 2024 is scaled to the 2024 AWI of 69,846.57. The AWI for 2000 was 32,154.82, so $40,000 earned that year counts as about $86,888, an indexing factor of 2.1722. The same $40,000 earned in 2024 or later counts as $40,000.

Wage indexing is different from the cost-of-living adjustment, which follows consumer prices and applies to your benefit from age 62 on. Wage indexing shapes the starting benefit; the COLA keeps it growing afterward. The same wage index also moves the bend points in the PIA formula each year, which is why AIME and the formula applied to it always come from the same eligibility year.

For retirement benefits, the number of years in the average equals your elapsed years, the years after you turn 21 and before you turn 62, minus five. For almost everyone that is 40 minus 5, or 35. If you have fewer than 35 years of covered earnings, the missing years count as zero, and the total is still divided by 420 months, so every zero dilutes the average. Disability benefits, and survivor benefits on the record of a worker who dies young, count fewer years, set by the worker’s age.

Working longer helps only when a new year beats the lowest year in your top 35. Earnings after 60 are not indexed, but a strong late year can still replace a zero or a weak early year, and SSA recalculates benefits each year for people who keep working after they claim. For someone who already has 35 solid years, an extra year often moves AIME very little.

That is why career length can matter as much as pay. People planning early retirement or Coast FIRE often stop with fewer than 35 years on their record, so projecting the zero years, rather than assuming the estimate on today’s Statement will hold, gives a more honest benefit figure.

AIME looks like a salary average, which is where most mistakes start. It is a monthly figure, not an annual one. It is wage-indexed rather than stated in the dollars you were paid. And it always divides by the same 420 months, however long you actually worked. A projection that gets any of these wrong can miss the eventual benefit by hundreds of dollars a month: five zero years in the worked example cost $320 a month at full retirement age. Watch for these five errors.