Question

It is 2019 and you are a single person who has reached the full benefits age for social security. your average indexed monthly earnings (aime) are $4,000. what is your primary insurance amount (PIA)? (you have to look up the bend points for 2019)

Answer 1

PIA definition
The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

In order to calculate the PIA, the average indexed monthly earnings (AIME) is split into three parts. Predetermined percentages are applied to each part, and they are all summed together to get the PIA. If someone receives Social Security benefits, the number they use to calculate that benefit is from the primary insurance amount (PIA).

AIME Calculation

The Social Security Administration uses the PIA calculation because of Title II of the Social Security Act, under the 1978 New Start Method. Each calendar year, each covered worker with wages up to the Social Security wage base (SSWB) is recorded. Making the calculation for Social Security benefits starts by looking at how long you worked and how much you made each year during your 35 highest-earning years.

Since the AIME is already Given $4000

PIA formula bend points
The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.

For 2019 these portions are the first $926, the amount between $926 and $5,583, and the amount over $5,583. These dollar amounts are the "bend points" of the 2019 PIA formula. A table shows bend points, for years beginning with 1979, for both the PIA and maximum family benefit formulas.

PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2019, or who dies in 2019 before becoming eligible for benefits, his/her PIA will be the sum of:

(a) 90 percent of the first $926 of his/her average indexed monthly earnings, plus

(b) 32 percent of his/her average indexed monthly earnings over $926 and through $5,583, plus

(c) 15 percent of his/her average indexed monthly earnings over $5,583.

PIA = 90%*926 = 833.4

32%*(4000-926) = 983.68

Total = 1,817 (rounded off)