Average Indexed Monthly Earnings

When you are approved for Social Security Disability benefits, the Social Security Administration (SSA) calculates an amount called your average indexed monthly earnings to determine your primary insurance payout. In addition to Social Security Disability, your average indexed monthly earnings are also used by the SSA to calculate your payments once you qualify for retirement benefits.

To determine your average indexed monthly earnings, the following steps are followed:

  • First, the taxable income you have earned for every year you worked is multiplied by a formula known as the national average wage index. Each year this national average wage indexing series is put out to adjust wages to that year’s rate of inflation, and is available on the SSA’s website. Because it takes time to calculate these indexes, there is always a two year gap.
  • Once your years of income have been adjusted, or indexed, to account for inflation, they are totaled. This amount is divided by the number of years you have worked between age 21 and your last year of employment before qualifying for Social Security Disability. The result is your yearly indexed earnings. Dividing this number again by 12 gives you your average indexed monthly earnings.

When your average indexed monthly earnings have been determined, they are used to calculate your expected Social Security Disability benefits. This part uses three percentages known as bend points which grow smaller as your average index monthly earnings increase. Where your average indexed monthly earnings fall between the bend points determines which percentage they will be multiplied by.

The three portions obtained by this formula are added together and become the amount of your Social Security Disability primary payout per month. Those with lower average indexed monthly earnings receive a higher percentage of their earnings as their Social Security Disability primary payout than those with higher average indexed monthly earnings.