Example
We won't go through an entire Social Security benefit calculation here, but let's look at a quick example to illustrate how this works.
Let's say that you'll turn 65 in 2025 (so you turned 62 in 2022), and as part of your work record, you earned $75,000 in 2017 and $77,000 in 2018.
A quick look at the 2022 indexing factors on the SSA website shows a factor of about 1.1055 for 2017 and 1.0668 for 2018. Applying these to your actual earnings shows that your indexed earnings were:
- $75,000 x 1.1055 = $82,913 in 2017
- $77,000 x 1.0668 = $82,144 in 2018
These are the numbers that would be used to calculate your AIME, assuming they are among your 35 highest-earning years.
We'll say that you continue to calculate the indexed version of the rest of your earnings and find that the average you earned in your 35 highest-earning years is $82,000. Dividing this by 12 would give you an average indexed monthly earnings of $6,833. This figure would then be applied to the Social Security benefit formula that was in place for the year in which you first became eligible.