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Indexed earnings used to compute initial benefits When indexing an individual's earnings for benefit computation purposes, one must first determine the year of first eligibility for benefits. For retirement, eligibility is at age 62. If a person reaches age 62 in 2008, for example, then 2008 is the person's year of eligibility. An individual's earnings are always indexed to the average wage level two years prior to the year of first eligibility. Thus, for a person retiring at age 62 in 2008, the person's earnings would be indexed to the average wage index for 2006, or 38,651.41. Earnings in a year before 2006 would be multiplied by the ratio of 38,651.41 to the average wage index for that year; earnings in 2006 or later would be taken at face value. (See two examples of indexed earnings.)
Indexed program amounts
Determination of the National Average Wage Index for 2006 The average amounts of wages calculated directly from the SSA data were $35,448.93 and $37,078.27 for 2005 and 2006, respectively. To determine the national average wage index for 2006 at a level that is consistent with the national average wage indexing series for prior years, we multiply the 2005 national average wage index of 36,952.94 by the percentage increase in average wages from 2005 to 2006 (based on SSA-tabulated wage data). In other words, the national average wage index for 2006 is 36,952.94 times $37,078.27 divided by $35,448.93, which equals 38,651.41. The complete average wage indexing series is shown below. |
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