- 90% of AIME up to a first bend point
- 32% of AIME between a first and second bend point
- 15% of AIME above the second bend point
The bend points are income thresholds, and the ones that matter to you are those in effect when you turn 62. In 2021, the first bend point is $996 and the second is $6,002. Your bend points differ if you turn 62 in a different year.
Knowing this formula is important mostly because you need to know that working less than 35 years reduces your AIME and thus reduces your average benefit. And working longer than 35 years could raise your AIME if you’re earning more later in life and can thus replace some lower-earning years with higher-earning ones in the AIME calculation.
3. When you’re entitled to spousal or survivors benefits
Spousal and survivors benefits could potentially be worth more than your own retirement income if you didn’t earn very much or didn’t work enough to earn Social Security on your own. But you must know when you’re entitled to them.
Obviously, if you’re married when you retire or when your spouse dies, survivors or spousal benefits are an option for you. But you can also get these benefits if you divorced after a marriage lasting at least 10 years and you either haven’t remarried (in the case of spousal benefits) or didn’t remarry prior to age 60 (in the case of survivors benefits).