From career earnings to AIME
The computation caps each year of earnings at the taxable maximum, multiplies by an index factor tied to that year’s average wage, selects the highest 35 years, and divides the total by 420 months. The result is the average indexed monthly earnings, or AIME. Years with no earnings enter the average as zeros, which is why a 30-year career is still divided by 420.
The AIME is not the benefit. It is the input to the formula below.
The three bands
| Band | 2026 | 2027 | Marginal rate |
|---|---|---|---|
| First | $0 – $1,286 | $0 – $1,340 | 90% |
| Second | $1,286 – $7,749 | $1,340 – $8,077 | 32% |
| Third | above $7,749 | above $8,077 | 15% |
A worked example makes the shape obvious. Take an AIME of $9,000 in 2027:
- 90% of $1,340 = $1,206.00
- 32% of $6,737 ($8,077 − $1,340) = $2,155.84
- 15% of $923 ($9,000 − $8,077) = $138.45
The sum is $3,500.29, rounded down to the next lower dime for a PIA of $3,500.20. Note that the third band contributed $138 — 4% of the total — from $923 of average earnings. That is the formula’s progressive design working as intended.
What happens at each bend point
The first bend point is where the 90% rate ends, and for a low earner it covers the whole AIME: someone with an AIME of $1,200 gets a PIA of $1,080. The second bend point is the practical plateau. Above $8,077, each $1,000 of additional AIME adds $150 a month, and since AIME is capped by the taxable maximum, the marginal return on being a very high earner is small.
The bend points are indexed to average wages, not to prices, so they rise faster than the COLA in most years. The 2027 increase of $54 and $328 followed 2026’s $1,286 and $7,749, keeping the formula’s shape roughly constant across cohorts.
The family maximum uses different points
Benefits payable on one record are capped by a family maximum computed from the PIA using three separate bend points: $1,712, $2,471 and $3,223 in 2027, against $1,643, $2,371 and $3,093 in 2026. The percentages there are 150%, 272%, 134% and 175% across the four segments. A spouse or child benefit is reduced pro rata when the total exceeds that cap, which is why adding a family member does not always add the full amount.
One implication surprises high earners. Each additional $1,000 of AIME — roughly $420,000 of lifetime covered earnings, or $12,000 a year across 35 years — adds $150 a month to the PIA. Contributions on those same earnings ran at 6.2% up to the wage base each year. The return is positive but small, which is why delaying a claim by a year often adds more than a year of maximum earnings.
For lower earners the arithmetic inverts. Inside the 90% band, $100 of additional AIME adds $90 a month, so a modest increase in covered earnings near the bottom of the scale is worth far more per dollar than the same increase at the top.