Benefit Calculation Examples for Workers Retiring in 2024
We illustrate the calculation of retirement benefits using two examples, labeled case A and case B. In each case, the worker retires in 2024. Case A, born in 1962, retires at age 62. Case B, born in 1958, retires at his normal (or full) retirement age. In each case, we assume the worker has covered earnings from 1984 through 2023, as shown at right in columns labeled "nominal earnings."
Indexing brings nominal earnings up to near-current wage levels. For each case, the table shows columns of earnings before and after indexing. Between these columns is a column showing the indexing factors. A factor will always equal one for the year in which the person attains age 60 and all later years. The indexing factor for a prior year Y is the result of dividing the average wage index for the year in which the person attains age 60 by the average wage index for year Y. For example, the case-A indexing factor for 1984 is the average wage for 2022 ($63,795.13) divided by the average wage for 1984 ($16,135.07).
We use the highest 35 years of indexed earnings in a benefit computation. The dropped indexed amounts are shown in red. Below the indexed earnings are the sums for the highest 35 years of indexed earnings and the corresponding average monthly amounts of such earnings. (The average is the result of dividing the sum of the 35 highest amounts by the number of months in 35 years.) Such an average is called an "average indexed monthly earnings" (AIME). The next step is to calculate benefits based on AIME amounts.
| Year | Case A, born in 1962 | Case B, born in 1958 | ||||
|---|---|---|---|---|---|---|
| Nominal earnings | Indexing factor | Indexed earnings | Nominal earnings | Indexing factor | Indexed earnings | |
| 1984 | $15,086 | 3.9538 | $59,647 | $37,800 | 3.2318 | $122,163 |
| 1985 | 15,779 | 3.7922 | 59,838 | 39,600 | 3.0998 | 122,751 |
| 1986 | 16,298 | 3.6829 | 60,024 | 42,000 | 3.0104 | 126,437 |
| 1987 | 17,392 | 3.4621 | 60,214 | 43,800 | 2.8299 | 123,951 |
| 1988 | 18,305 | 3.2996 | 60,400 | 45,000 | 2.6971 | 121,369 |
| 1989 | 19,089 | 3.1740 | 60,588 | 48,000 | 2.5944 | 124,530 |
| 1990 | 20,033 | 3.0338 | 60,777 | 51,300 | 2.4798 | 127,215 |
| 1991 | 20,844 | 2.9248 | 60,965 | 53,400 | 2.3907 | 127,665 |
| 1992 | 21,986 | 2.7815 | 61,154 | 55,500 | 2.2736 | 126,184 |
| 1993 | 22,243 | 2.7578 | 61,342 | 57,600 | 2.2542 | 129,842 |
| 1994 | 22,910 | 2.6857 | 61,530 | 60,600 | 2.1953 | 133,034 |
| 1995 | 23,901 | 2.5822 | 61,717 | 61,200 | 2.1107 | 129,174 |
| 1996 | 25,146 | 2.4618 | 61,905 | 62,700 | 2.0123 | 126,169 |
| 1997 | 26,695 | 2.3261 | 62,095 | 65,400 | 1.9013 | 124,347 |
| 1998 | 28,177 | 2.2104 | 62,282 | 68,400 | 1.8068 | 123,583 |
| 1999 | 29,837 | 2.0937 | 62,470 | 72,600 | 1.7114 | 124,247 |
| 2000 | 31,582 | 1.9840 | 62,659 | 76,200 | 1.6217 | 123,574 |
| 2001 | 32,432 | 1.9378 | 62,846 | 80,400 | 1.5839 | 127,347 |
| 2002 | 32,856 | 1.9185 | 63,035 | 84,900 | 1.5682 | 133,140 |
| 2003 | 33,759 | 1.8727 | 63,222 | 87,000 | 1.5308 | 133,177 |
| 2004 | 35,434 | 1.7896 | 63,411 | 87,900 | 1.4628 | 128,578 |
| 2005 | 36,839 | 1.7264 | 63,598 | 90,000 | 1.4111 | 127,003 |
| 2006 | 38,646 | 1.6505 | 63,786 | 94,200 | 1.3491 | 127,088 |
| 2007 | 40,519 | 1.5789 | 63,974 | 97,500 | 1.2906 | 125,830 |
| 2008 | 41,573 | 1.5434 | 64,162 | 102,000 | 1.2615 | 128,677 |
| 2009 | 41,067 | 1.5670 | 64,352 | 106,800 | 1.2809 | 136,796 |
| 2010 | 42,160 | 1.5308 | 64,539 | 106,800 | 1.2513 | 133,637 |
| 2011 | 43,608 | 1.4843 | 64,728 | 106,800 | 1.2133 | 129,577 |
| 2012 | 45,100 | 1.4394 | 64,915 | 110,100 | 1.1765 | 129,536 |
| 2013 | 45,809 | 1.4212 | 65,104 | 113,700 | 1.1617 | 132,083 |
| 2014 | 47,572 | 1.3725 | 65,292 | 117,000 | 1.1219 | 131,258 |
| 2015 | 49,369 | 1.3263 | 65,480 | 118,500 | 1.0841 | 128,471 |
| 2016 | 50,070 | 1.3115 | 65,668 | 118,500 | 1.0720 | 127,035 |
| 2017 | 51,948 | 1.2677 | 65,857 | 127,200 | 1.0362 | 131,810 |
| 2018 | 53,984 | 1.2234 | 66,044 | 128,400 | 1.0000 | 128,400 |
| 2019 | 56,167 | 1.1792 | 66,233 | 132,900 | 1.0000 | 132,900 |
| 2020 | 57,918 | 1.1468 | 66,421 | 137,700 | 1.0000 | 137,700 |
| 2021 | 63,247 | 1.0532 | 66,609 | 142,800 | 1.0000 | 142,800 |
| 2022 | 66,797 | 1.0000 | 66,797 | 147,000 | 1.0000 | 147,000 |
| 2023 | 69,455 | 1.0000 | 69,455 | 160,200 | 1.0000 | 160,200 |
| Highest-35 total | 2,235,012 | Highest-35 total | 4,582,841 | |||
| AIME | 5,321 | AIME | 10,911 | |||
Note: Nominal earnings for case B are limited by the contribution and benefit base for all years. Case B is an example of a person who has earned at or above the maximum taxable amount in each year.
