What is Social Security AIME? How earnings translate into retirement benefits

If you’ve looked at your Social Security statement lately, you might wonder exactly how Social Security benefits are calculated. Learning how Social Security benefits are calculated can help you make decisions that support your long‑term retirement strategy and the financial security of your loved ones.

Social Security benefits are designed to replace a portion of your pre-retirement earnings, which is why your earnings history is the basis for the formula that determines your payouts. This factor is called average indexed monthly earnings, or AIME. 

Understanding AIME, the foundation of Social Security benefit calculations, can help you make informed career and income decisions and ensure you receive the correct benefit amount when you retire.

AIME is the Social Security Administration’s measure of your lifetime earnings, and it plays a central role in determining your retirement, disability and survivor benefits. It's your average monthly earnings over your 35 highest-earning years, adjusted for wage inflation. If you work fewer than 35 years, the formula accounts for the missing years.

While AIME alone cannot tell you how much you’ll receive each month from Social Security, it is a key factor in your retirement benefit calculation. The Social Security Administration uses AIME to compute your primary insurance amount (PIA), which is the monthly benefit you’ll receive if you start collecting benefits at your full retirement age.

Your AIME is recalculated anytime the list of your 35 highest-earning years changes—even if it’s after you reach full retirement age or you're already receiving benefits. 

AIME is the main factor in determining your PIA, which is the basis for how much you can get in Social Security benefits to help replace income in retirement or because of a disability or the death of a spouse. 

The more you earn and pay Social Security taxes (up to the earnings limit), the higher your AIME and benefit payouts will be.

Understanding how AIME affects your future benefits can help you make strategic decisions about work, income and tax planning. For instance, if you're nearing retirement age, AIME may be a powerful incentive to stay in a well-paying job a bit longer. AIME also may influence how you think about tax deductions if you're self-employed. While deductions minimize your near-term tax burden, they also reduce your net earnings, which are factored into AIME.

More broadly, because AIME is a major component of your benefits calculation, it can influence long‑term retirement planning, income‑replacement strategies and how you prepare for future financial needs. After all, knowing what income could be in store for your retirement years better prepares you to plan your goals, achieve them and have a retirement fund that lasts.

Your AIME doesn’t appear on the Social Security statement you may receive in the mail or on your My Social Security account, although both contain your earnings records so you can calculate AIME yourself. This can take some of the mystery out of what your Social Security benefit amount will be. 

Here are the steps for AIME calculation:

1. The SSA reviews your entire earnings history.
2. Your earnings are indexed to reflect the change in general wage levels that occurred during your working years up to age 60. 
3. Your 35 years with the highest indexed earnings—up to the limit known as the taxable maximum—are selected. If you've worked for fewer than 35 years, those years will be represented by zeros in the calculation.
4. The indexed earnings of those 35 years are added together.
5. Divide the 35-year total by 420 months (35 years × 12 months).
6. The resulting average monthly figure is rounded down to the next full dollar to become your AIME. 

Here’s a hypothetical example for an average U.S. worker: If the sum of the earnings of your highest-earning 35 years (indexed for wage growth) is $2,500,000, your AIME would be $5,952 ($2,500,000 ÷ 420 = $5,952). 

The SSA provides more detailed examples that illustrate how indexing factors come into play in determining AIME. 

Wage indexing adjusts your past earnings to reflect today’s wage levels, ensuring your benefits are based on income that keeps pace with long‑term wage growth. It's used because average wages, like the prices of goods and services, rise over time due to inflation.  

The Social Security Administration uses the National Average Wage Index to adjust earnings from earlier in your career to bring them closer to modern-day equivalents. Adjusting helps ensure older earnings are measured fairly against recent income levels and that your benefit is more reflective of the percentage of your pre-retirement earnings that Social Security replaces. Earnings as of age 60 and over are not adjusted.

These adjustments that account for wage inflation are different from the annual cost-of-living adjustments (COLAs) that Social Security recipients automatically receive. COLAs make benefit amounts larger so they can better keep pace with rising prices.  

Social Security is full of complexities you need to know about. Consider these key factors that can influence how your AIME is calculated and how much you may receive in Social Security benefits.

There’s a limit on earnings that are subject to Social Security taxes each year. The taxable maximum amount changes annually and is set at $176,100 for 2025 and $184,500 for 2026. Any earnings above the yearly limit are not counted toward AIME. That means if your earnings total $250,000 in 2026, only the first $184,500 will be used to compute your AIME.

You can apply for Social Security even if you don’t have a work record of 35 years (as long as you have enough credits). However, those missing years will be input as zeros, so your AIME will be lower than if you worked for at least 35 years. 

If you work for an employer that doesn’t participate in the Social Security system, such as certain government or foreign employers, you have noncovered earnings that don’t count toward Social Security benefits. 

Checking estimates of your future benefits on your Social Security Statement or by accessing SSA tools like its Quick Calculator or Online Benefits Calculator can prove eye-opening. This kind of check-in may motivate you to take steps to maximize your Social Security. Here are some ways to ensure your AIME is accurate and that it is working hard for you.

The Social Security Administration recommends checking the record on your statement in August to make sure the previous year's amount is correct. Note that earnings above the taxable maximum do not appear on your earnings record.

Sometimes earnings are missing. This can happen if your employer makes a mistake in reporting your earnings, or if you have changed your name but didn’t inform Social Security. You can request a correction if something doesn't look right.

If there are fewer than 35 years in your work history, consider staying in the workforce longer if you’re able. Filling in any years that would otherwise be calculated with a zero can make a meaningful difference in your AIME.

Remember, higher earnings (up to the earnings limit) translate into higher payouts. Plus, any highest-earning years you achieve—even if they happen after you claim Social Security—can replace low-earning or zero-earning years.

Careful tax reporting is important for everyone, but if you’re self-employed, you report your earnings for Social Security when you file your federal income tax return with the IRS. Inaccuracies can jeopardize the size of your future benefits. 

AIME is the cornerstone of how Social Security determines your future benefits, and understanding it can help you build a retirement strategy that aligns your expected income with your long‑term goals. Understanding how it’s calculated and its impact can help you make more informed decisions about your future as a worker, as a retiree or perhaps even as a Social Security recipient who is still on the job. 

Consult a Thrivent financial advisor for help creating a retirement strategy that aligns with your objectives and that factors in the Social Security income you expect to receive.