Are You Getting the Maximum Social Security Benefits?

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Did you get your first social security check in the mail and think, “How did the SSA come up with this number?” Trust us, you’re not alone. Many people don’t realize how their maximum Social Security benefits are actually calculated or the complex formula the SSA uses in order to determine this figure. These calculations go beyond work history, years employed, and type of labor. Instead it digs even deeper and looks at your average indexed monthly earnings, fixed percentages, and even cost of living adjustments (COLA).

If you’re lost, that’s ok. We will break it down for you in the article below and give you a better idea of why your disability benefit amounts are what they are. Even better, we’ll take you step-by-step starting from square one so new applicants can get a good grasp of what their benefits may be and better grapple tough terminology.



Step 1: Find Your AIME

First let’s start by looking at your Average Indexed Monthly Earning (AIME). This amount is determined by the earnings you receive each year while working and contributing to the Social Security fund. The SSA should have record of your yearly earnings if you need a copy. Once you have these numbers, an “index” is then applied to each years earnings. This “index” will reflect a change in the wage levels that occur annually. This “index” number should account for inflation.

According to the SSA, up to 35 years years of earnings are needed in order to determine your AIME. If you worked over 35 years, the SSA will then choose the years in which you had the highest indexed earnings, sum such indexed earnings, and divide that amount by the total number of months that are represented. Once this is done, the final number will be referred to as you AIME. You need to know your AIME to determine how much money you will receive in monthly benefits, which will be discussed further in step 2.

Step 2: Calculate Your PIA

PIA stands for Primary Insurance Amounts, or the amount of money you may receive each month in benefits. This number is calculated using fixed percentages and a monetary amount that is mandated by the SSA. It’s important to note that the percentages used to calculate PIA will always stay the same, but the monetary amount used will change annually based upon the national average wage index. These dollar amounts are known as “bend points,” which we will dive deeper into later.

So now that we know what numbers will be looking for when calculating PIA, let’s look at the formula that will be used as provided by the SSA. These figure consist of the most current data released in 2016 and are used to calculate both retirement and disability benefits. Keep in mind that the same formula can be used to calculate benefits for beneficiaries that are both alive and deceased.

(a) 90 percent of the first $856 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $856 and through $5,157, plus
(c) 15 percent of his/her average indexed monthly earnings over $5,157.

Once you have your PIA calculated you will then round it to the nearest $.10. This final number will be the projected amount of monthly benefits you should expect to receive each month from the SSA.

Understanding Bend Points

While explaining step 2, I briefly mentioned bend points as the monetary amount that is used to help calculate PIA. But they are so much more than that. Bend points are also used to calculate the Family Maximum Benefits for a beneficiaries spouse, window, or dependents. These family benefits are crucial for loved ones who rely on beneficiaries in order to make ends meet. Bend points are determined by the the SSA on an annual basis and each year they are subject to change.

How bend points are determine are based on the annual Average Wage Index (AWI). The AWI is always two years behind, so for applicants looking to apply in 2016 they will be referring to the AWI from 2014. When bend points were first established in 1979, the AWI from two years earlier was used to establish the initial bend points. The bend points that were initially set were $180 for the first bend and $1,085 for the second bend. This is important to know because it is the basis for how each bend point has been determined since.

For example, when looking to discover what the bend point for the PIA formula will be for 2016 we should take the AWI for 2014 and divide the amount by the AWI amount from 1977. Then we can take the result and multiply it by $180 to get your first bend. Then take the same initial number and multiply it by $1,085 to get the second bend point.

If your interested in seeing what the bend points have been over the last 37 years, take a look at the bend point formula chart provided by the SSA. There you will also see the Family Maximum Benefit formula, of which the same technique as above can be applied in order to determined the bend points for dependents.

Seeking Legal Representation

It’s easy to get confused by the disability benefits process. Not only are you having to deal with the stresses that accompany your medical condition, but also the strains of applying for much needed benefits. Luckily those in need don’t have to go at the process alone. Many people in situations just like yours have have relied on the trusted support of a disability attorney or advocate to assist them with navigating through a sometimes complex system. A legal representative can help you decode legal jargon, collect proper medical records, and file an appeal to the SSA if an unfavorable decision were to arise.

Are you ready to get started? Simply fill out our free benefits evaluation below to find out if you may qualify.

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