What does PIA stand for? The definition of Primary Insurance Amount for Social Security retirement benefits

The Social Security Administration (SSA) sends monthly payments to nearly 69 million Americans. The vast majority of those receive retirement, or old-age benefits. The amount that each recipient receives is specific to them and is based on a number of factors, including the age when the recipient begins to claim benefits and earnings history.

The earliest a person can retire is age 62, plus one month as you have to be 62 throughout the first month of retirement. However, for those born from 1954 to 1960 the normal retirement age has been gradually increasing from 66 to 67. Those that claim benefits before they reach their full retirement age will see lower monthly payments than if they wait.

The other major factor that determines how much you will receive each month from Social Security is your earnings over your lifetime of work. First, the SSA will consider a beneficiary’s 35 highest-earning years, and these are adjusted to reflect national wage growth over the years. That will allow the SSA to calculate your average indexed monthly earnings (AIME).

What does PIA stand for?

The agency will then run your AIME through a progressive rate formula which results in your PIA; Primary Insurance Amount. For those who retire before their full retirement age, the Social Security early retirement penalty will reduce your PIA based on the number of months you fall short of your normal retirement age.

How does the PIA work?

The Social Security Administration benefit formula includes two bend points where the marginal replacement rate for monthly earnings changes. The bend points are adjusted annually with the average wage index. The bend points are $1,115 and $6,721 in 2023 and are applied in the following way: