20 C.F.R. § 404.221

Current through September 30, 2024
Section 404.221 - Computing your average monthly wage
(a)General. Under the average-monthly-wage method, your social security earnings are averaged over the length of time you can reasonably have been expected to have worked under social security after 1950 (or after you reached age 21, if later).
(b)Which of your earnings may be used in computing your average monthly wage.
(1) In computing your average monthly wage, we consider all the wages, compensation, self-employment income, and deemed military wage credits that are creditable to you for social security purposes. (The maximum amounts creditable are explained in §§ 404.1047 and 404.1096 of this part.)
(2) We use your earnings in your computation base years in computing your average monthly wage. All years after 1950 up to (but not including) the year you become entitled to old-age or disability insurance benefits, or through the year you die if you had not been entitled to old-age or disability benefits, are computation base years for you. Years after the year you die may not be used as computation base years even if you have earnings credited to you in them. However, years beginning with the year you become entitled to benefits may be used for benefits beginning with the following year if using them would give you a higher primary insurance amount. Years wholly within a period of disability are not computation base years unless your primary insurance amount would be higher if they were. In such situations, we count all the years during the period of disability, even if you had no earnings in some of them.
(c)Number of years to be considered in computing your average monthly wage. To find the number of years to be used in computing your average monthly wage-
(1) We count the years beginning with 1951 or (if later) the year you reached age 22 and ending with the year before you reached age 62, or became disabled, or died before age 62. Any part of a year-or years-in which you were disabled, as defined in § 404.1505 , is not counted unless doing so would give you a higher average monthly wage. In that case, we count all the years during the period of disability, even if you had no earnings in some of those years. These are your elapsed years. (If you are a male and you reached age 62 before 1975, see paragraph (c)(2) of this section for the rules on finding your elapsed years.)
(2) If you are a male and you reached age 62 in-
(i) 1972 or earlier, we count the years beginning with 1951 and ending with the year before you reached age 65, or became disabled or died before age 65 to find your elapsed years;
(ii) 1973, we count the years beginning with 1951 and ending with the year before you reached age 64, or became disabled or died before age 64 to find your elapsed years; or
(iii) 1974, we count the years beginning with 1951 and ending with the year before you reached age 63, became disabled, or died before age 63 to find your elapsed years.
(3) Then we subtract 5 from the number of your elapsed years. This is the number of your benefit computation years; we use the same number of your computation base years in computing your average monthly wage. For benefit computation years, we use the years with the highest amounts of earnings, but they may include years of no earnings. You cannot have fewer than 2 benefit computation years.
(d)Your average monthly wage. After we find your benefit computation years, we compute your average monthly wage by-
(1) Totalling your creditable earnings in your benefit computation years;
(2) Dividing the total by the number of months in your benefit computation years; and
(3) Rounding the quotient to the next lower whole dollar if not already a multiple of $1.

Example: Mr. B reaches age 62 and becomes entitled to old-age insurance benefits in August 1978. He had no social security earnings before 1951 and his year-by-year social security earnings after 1950 are as follows:

Year Earnings
1951$2,700
19522,700
19533,400
19543,100
19554,000
19564,100
19574,000
19584,200
19594,800
19604,800
19614,800
19624,800
19634,800
19641,500
19650
19660
19670
19683,100
19695,200
19707,100
19717,800
19728,600
19738,900
19749,700
197510,100
197610,800
197711,900

We first find Mr. B's elapsed years, which are the 27 years 1951-1977. We subtract 5 from his 27 elapsed years to find that we must use 22 benefit computation years in computing his average monthly wage. His computation base years are 1951-1977, which are the years after 1950 and prior to the year he became entitled. This means that we will use his 22 computation base years with the highest earnings to compute his average monthly wage. Thus, we exclude the years 1964-1967 and 1951.

We total his earnings in his benefit computation years and get $132,700. We then divide that amount by the 264 months in his 22 benefit computation years and find his average monthly wage to be $502.65, which is rounded down to $502.

(e)"Deemed" average monthly wage for certain deceased veterans of World War II. Certain deceased veterans of World War II are "deemed" to have an average monthly wage of $160 (see §§ 404.1340 through 404.1343 of this part) unless their actual average monthly wage, as found in the method described in paragraphs (a) through (d) of this section is higher.

20 C.F.R. §404.221