The primary insurance amount (PIA) is the benefit you would receive if you elect to receive benefits at your full retirement age (FRA).
What is Your Full Retirement Age?
According to SSA.gov, full retirement age (FRA) — sometimes referred to as normal retirement age — is defined as “the age at which a person may first become entitled to full or unreduced retirement benefits.” Unreduced retirement benefits is also known as the primary insurance amount.
How is My Primary Insurance Amount Calculated?
For those of you that are taking out a pen and paper or loading the Excel spreadsheet (you know who you are ☺), this section is for you.
We first must understand the definition of bend points. Bend points are determined by the Social Security Administration and vary by your age. For 2017, the first bend point is the first $885, the amount between $885 and $5,336, and the amount over $5,336. Just keep those numbers handy, we will use them when we go over the calculation of your primary insurance amount.
According to SSA.gov, if you become eligible for benefits in 2017, the PIA formula is the sum of:
- 90% of the first $885 of his/her averaged indexed monthly earnings, plus
- 32% of his/her average indexed monthly earnings over $885 and through $5,336, plus
- 15% of his/her average indexed monthly earning over $5,336.
Then you have to round the amount to next lower multiple of $0.10 if it is not already a multiple of $0.10.
Got that? It is super easy. I think I am going to go home, and instead of working on my six-year-old daughter’s Common Core math homework (which by the way, I have no idea how to do and she is only in first grade, LOL), and teach her the primary insurance amount formula. ☺
I Have a Trick
For those of us that do not feel like calculating the formula, I have a trick for you. You can always get your estimated primary insurance amount on your annual benefits statement or off of the home page of the overview page of your my Social Security website (which I know you have already created, because I told you do it already).
I am telling you, it is so easy. Here is a sample benefits statement from SSA.gov for “Wanda Worker.” The highlighted portion in yellow is where your retirement benefits would be. The first figure will be your primary insurance amount (PIA) you are eligible to receive if you claim your benefits at your full retirement age (FRA). It also shows you what your estimated benefit would be if you delayed taking benefits and allow your credits to accumulate to age 70, or if you decided to take benefits early at age 62. For more on knowing when to file, please read my other article: Why Knowing When to File for Social Security is Difficult — Really Difficult.
See, isn’t that much easier than trying to calculate the formula? All kidding aside, it is good to understand the formula behind your primary insurance amount, but it’s also a lot quicker to check your statement or go online and view your my Social Security account.
How to Create an Online Social Security Account
For those of you that have not created your online account, you will need to set up your account on the Social Security Administration website. Here is a step-by-step video tutorial I created just for you. What are you waiting for? Watch the video and set up your account now, please!
Additionally, if you want a comprehensive review, please take a look at our Social Security Solution Program. I put this program together from the feedback I have received from clients and readers of Social Security Teacher. This solution is designed specifically for those of you who want help and guidance in making the best decision for you and your family. I am a CERTIFIED FINANCIAL PLANNER™ professional, and have the experience to help you get there.