The calculation of Social Security benefits in the United States is based on your earnings history, using a two-step process: computing an Average Indexed Monthly Earnings (AIME) and then applying a Benefit Formula (the Primary Insurance Amount, or PIA) to that AIME. Here’s a clear overview of how it works and what can affect the final amount. What goes into the calculation

• 35 highest-earning years: The SSA looks at your earnings during your working years and uses the 35 years with the highest wages (adjusted for inflation). If you worked fewer than 35 years, zeros are included for the missing years, which lowers the average. This yields a base earnings figure that reflects your lifetime earnings in today’s dollars.
• Indexing for wage growth: Each year’s earnings are indexed to reflect changes in the national wage levels up to age 60, so earlier earnings are scaled to present-day purchasing power.
• AIME (Average Indexed Monthly Earnings): The indexed 35-year earnings are averaged (divided by 35 years), then divided by 12 to convert to a monthly figure. This AIME is the core input for the PIA calculation.
• Bend points and the PIA formula: The AIME is fed into a piecewise formula with “bend points” that are updated annually for inflation. The usual structure (using representative bend points for a given year) is:
  • 90% of the first portion of AIME up to the first bend point
  • 32% of the portion of AIME between the first and second bend points
  • 15% of the portion of AIME above the second bend point
    The result is the Primary Insurance Amount (PIA), which is the monthly benefit at your full retirement age (FRA).

Key terms and how they affect your benefit

• Full Retirement Age (FRA): Your FRA depends on your birth year. Claiming benefits earlier than FRA reduces your monthly amount, while delaying benefits past FRA can increase them—up to age 70.
• Early or delayed claiming: Taking benefits before FRA reduces the monthly benefit, often permanently for as long as you receive benefits. Delaying benefits beyond FRA up to age 70 increases the monthly amount, because you accrue delayed retirement credits.
• Spousal and survivor benefits: Spouses may be eligible for up to 50% of the worker’s PIA if they file at or after FRA, subject to other rules. Survivor benefits can be based on the deceased spouse’s PIA and can be available to the widow(er) at their own FRA or later, subject to rules.

Important caveats

• Earnings after retirement: Earnings in the year you begin receiving benefits can affect the annual benefit only if you claim before FRA; once FRA is reached, continuing work generally doesn’t reduce benefits, though there are annual earnings limits before FRA that could temporarily reduce benefits.
• Inflation indexing: The bend points and PIA are updated annually to reflect changes in average wages, so the exact numbers used in the calculation change from year to year.
• Not a simple average: Because of the progressive bend-point structure, higher earnings don’t translate to a proportional increase—your marginal benefit per dollar declines as earnings rise.

What you can use to estimate your benefits

• SSA’s online tools: Get a personalized estimate by inputting your earnings history or using a calculator that projects benefits at different claiming ages. These tools apply the official formula and current bend points for the year you’re estimating.
• Quick calculators and benefit estimates: Several reputable sources explain the formula and provide step-by-step examples, including the AIME calculation and how the bend points determine the PIA.

If you’d like, provide:

• Your birth year (to determine FRA)
• Your estimated or actual annual earnings over your top 35 years
• Whether you plan to claim at FRA or later

I can walk you through a rough calculation using those inputs and show how your AIME and PIA would typically come out, plus how claiming age would alter the monthly benefit.