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Average Indexed Monthly Earnings

Your average indexed monthly earnings are used by Social Security to calculate the amount of your Social Security Disability benefits. To calculate your average indexed monthly earnings divide the sum of your 35 highest years of indexed earnings (up to age 60) by the total by the number of months worked in those years. More specifically, to determine your average indexed monthly earnings, Social Security averages your earning from the year you turned 21 to the year you became disabled. If have over 35 years of indexed earring, the Social Security Administration only averages your 35 highest years of earnings.

To determine your primary insurance amount (PIA), which is the basis of your Social Security Disability benefits, Social Security applies a formula to your average indexed monthly earnings. This calculation takes into account fluctuations in the general wage levels to reflect the general rise in the standard of living that occurs during a person’s working life.

Monthly Social Security Disability benefits derived from the PIA will be lower if you become disabled before you reach retirement age. Social Security Disability benefits are re-determined every three to seven years.

In order to determine your Social Security Disability benefits, the Social Security Administration follows these steps:

To determine your average indexed monthly earnings Social Security

  • Uses your Social Security Statement to determine your earnings that were taxed by Social Security.
  • Multiplies each year's taxable earnings by the national wage indexing factor for that year (available at http://www.ssa.gov/oact/cola/awifactors.html) to calculate each year’s adjusted earnings.
  • Adds up your adjusted earnings from the year in which you attained age 21 to the year in which you became disabled to determine your total adjusted earnings.
  • Divides your total adjusted earnings by the number of years you worked between the year you attained age 21 and the year you became disabled (your average adjusted earnings).
  • Divides your average adjusted earnings by 12 and rounds down to the full dollar amount. This figure is your average indexed monthly earnings (AIME).
  • Second, Social Security Administration applies a formula to your AIME to determine your primary insurance amount (PIA). Lower income workers receive a higher return on their Social Security taxes than higher income workers. This is accomplished by breaking the AIME into three parts and weighting each part. Because the graph of benefits has two “bends” in it, and Social Security refers to these break points as “bend points”. Your Social Security disability benefits will be the total of the three PIA amounts.