Social Security benefits are based on earnings averaged over most of a worker's lifetime. The calculation process involves the following steps in a three-tiered process:
- Step 1: Index Earnings. Actual earnings are first adjusted or "indexed" to account for changes in average wages since the year earnings were received.
- Step 2: Calculate the AIME. The average indexed Social Security monthly earnings (AIME) are calculated for the 35 years the worker earned the most.
- Step 3: Determine the PIA. A formula is applied to these earnings to arrive at the worker's basic Social Security benefit, or primary insurance amount (PIA).
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