Let’s get to basics – in case you believe some of the social media nonsense about Social Security…

Observations on life, Retirement, Social Security Leave a comment

… such as your benefit is based only on the FICA taxes you paid.

Here is the breakdown of the SSA benefit formula for 2026:

1. Calculate Your Average Indexed Monthly Earnings (AIME)

First, the Social Security Administration (SSA) looks at your highest 35 years of earnings.

  • They “index” these earnings to account for inflation (so a dollar earned in 1980 is compared fairly to a dollar earned today). Thus unrelated to taxes paid 35 years ago.
  • They add those 35 years up and divide by 420 (the number of months in 35 years).
  • The result is your Average Indexed Monthly Earnings (AIME).

2. Apply the “Bend Points” (The 2026 Formula)

The SSA then applies a formula to your AIME to find your Primary Insurance Amount (PIA)—this is your base benefit at Full Retirement Age. The formula uses three “bend points.”

For 2026, the calculation is:

  • 90% of the first $1,286 of your AIME
  • + 32% of any AIME between $1,286 and $7,749
  • + 15% of any AIME over $7,749

Example: If your AIME is $5,000:

  1. 90% of $1,286 = $1,157.40
  2. 32% of ($5,000 – $1,286) = $1,188.48
  3. Total PIA = $2,345.88 (rounded down to $2,345.80)

You can see your personal impact using a SSA online calculator.

Leave a Reply