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Automatic Increases
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Indexing Factors for Earnings

Automatic increases

Average wage index

Examples of indexed earnings

Indexing earnings
When we compute a person's benefit, we use the national average wage indexing series to index that person's earnings. Such indexation ensures that a worker's future benefits reflect the general rise in the standard of living that occurred during his or her working lifetime.

Eligibility and indexing
Wage indexing depends on the year in which a person is first eligible to receive benefits. For retirement, eligibility is at age 62. So if a person reaches age 62 in 2008, 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 (38,651.41). Earnings in a year before 2004 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.

A person's indexed earnings are used to calculate an average indexed monthly earnings (AIME) amount. We use this AIME amount to compute the person's primary insurance amount.

Year of eligibility
Note: If you select a year after 2008, we will use average wage increases that were estimated under the intermediate assumptions in the latest Trustees Report.

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Last reviewed or modified Wednesday May 28, 2008
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