An Overview

The Primary Insurance Amount is the retirement benefit before adjustments for post-retirement inflation, retiring before the Normal Retirement Age or retiring after Normal Retirement Age but before age 70. Once this amount is arrived at, it is very easy to determine a person's monthly Social Security retirement check.

The PIA is based on the Average Index Monthly Earnings (AIME) as applied to an inflation adjusted formula. That formula is determined in such a way that those who paid more Social Security tax will receive a higher benefit. However, there is a certain bias built in for lower earning workers. In other words, if person A earned twice as much as person B, person B will receive more than 50% of person A's benefit assuming they are both the same age and retiring on the same date.

The Primary Insurance Amount Computation

These are the steps to compute the PIA:

1. Multiply by .90 the lower of the low bend point, $505 in 1999, or your AIME.
2. Determine the lower of the high bend point, $3,043 in 1999, or your AIME.
3. Subtract the low bend point from the number determined in step 2. If the difference is less than zero, use zero.
4. Multiply to amount from step 3 by .32.
5. If your AIME is greater than the high bend point, subtract the high bend point amount from your AIME; otherwise, use zero for your step 5 amount.
6. Multiply the step 5 amount by .15.
7. Your PIA is the total of the amounts from steps 1, 4 and 6.

The bend points usually change each year. You would use the ones that are for the first year when you could take your Social Security benefits early. Currently, that year is the year in which you turn 62.