Two exempt amounts, and neither one moves with the COLA Benefit checks rose 2.8 percent in January 2026. The earnings test limits standing in front of those checks rose 4.62 percent and 4.83 percent. Two indexing rules sit behind those numbers, and a household that assumes the earnings test limit tracks the COLA will project the wrong figure. The test withholds benefits from people who claim Social Security before full retirement age and keep working. Two exempt amounts apply. For years entirely before the year of full retirement age, the 2026 annual amount is $24,480, and the Social Security Administration states in Exempt Amounts Under the Earnings Test that it will "withhold $1 in benefits for every $2 of earnings in excess of the lower exempt amount." In the calendar year a person reaches full retirement age, the amount is $65,160 and the rate falls to $1 for every $3. Neither figure is a cost-of-living adjustment. Section 203(f)(8)(B) of the Social Security Act ti...
A Social Security retirement benefit is not a percentage of a career's earnings. It is the sum of three separate percentages applied to three slices of one monthly figure, and the boundaries between the slices are two dollar amounts that change every year. For a worker who first becomes eligible in 2026, those amounts are $1,286 and $7,749. Below the first, the formula credits 90 cents on the dollar. Above the second, it credits 15.
That spread decides what an added year of work near the end of a career is worth. The same $100 of average indexed monthly earnings can raise a benefit by $90 or by $15, depending only on where it lands relative to two numbers the worker does not choose. The figures below are the amounts the Social Security Administration published for the 2026 year of eligibility.
The statute sets three percentages; the year sets two dollar amounts
The percentages are written into the Social Security Act. Section 215(a)(1)(A), codified at 42 U.S.C. 415(a)(1)(A), makes the first tier “90 percent of the individual's average indexed monthly earnings (determined under subsection (b)) to the extent that such earnings do not exceed the amount established for purposes of this clause by subparagraph (B),” and the following two clauses apply 32 percent to earnings between the first threshold and the second, and 15 percent to earnings above the second. The three percentages are fixed by statute. The two dollar amounts are not; subparagraph (B) directs that they be recomputed for each year. The full text is in the Social Security Administration's compilation of the Social Security Act, Section 215.
The agency describes the same structure in plainer terms: “The PIA is the sum of three separate percentages of portions of average indexed monthly earnings.” It then ties those portions to one specific year, which is neither the year a person claims nor the year they stop working: “The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.”
For the 2026 year of eligibility the published formula is 90 percent of the first $1,286 of average indexed monthly earnings, plus 32 percent of the amount over $1,286 and through $7,749, plus 15 percent of the amount over $7,749. The sum is then trimmed: “We round this amount to the next lower multiple of $.10 if it is not already a multiple of $.10.” Both the formula and that rounding rule appear on the Social Security Administration page for the Primary Insurance Amount.
Where $1,286 and $7,749 come from
They are the 1979 amounts, carried forward. When the formula took its present shape the bend points were $180 and $1,085. Each year both are multiplied by the ratio of the national average wage index for the second year before the year of eligibility to the index for 1977.
For 2026 that ratio is the 2024 index, $69,846.57, divided by the 1977 index, $9,779.44 — about 7.142185. The Social Security Administration prints the arithmetic itself: $180 times 69,846.57 divided by 9,779.44 equals $1,285.59, which rounds to $1,286, and $1,085 times the same figures equals $7,749.27, which rounds to $7,749. The year-by-year table is on the Social Security Administration page for Benefit Formula Bend Points, where the footnote defines the year as the “Year of eligibility; that is, the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.”
Two consequences follow from that definition. The bend points a worker will use are fixed by the calendar at age 62 and no later decision moves them; a person who turns 62 in 2026 and claims at 70 in 2034 still has the formula built on $1,286 and $7,749. And because the multiplier is a wage index rather than a price index, the bend points and the annual cost-of-living adjustment can move at very different rates in the same year.
What happens to earnings before the formula sees them
Average indexed monthly earnings, usually abbreviated AIME, is one number distilled from an entire covered career. The Social Security Administration states the span: “Up to 35 years of earnings are needed to compute average indexed monthly earnings.” Earlier years are first restated in current wage terms. For someone becoming eligible in 2026, each year of taxable earnings before 2024 is multiplied by the ratio of the 2024 national average wage index to the index for that year, and earnings in or after 2024 are counted at face value without indexing.
The highest 35 indexed years are then summed and divided by the number of months in them, which is 420. The agency finishes the step this way: “We then round the resulting average amount down to the next lower dollar amount.” The full description is on the Social Security Administration page on Social Security Benefit Amounts.
That division sets the exchange rate between a paycheck and the formula. One dollar of AIME takes $420 of added indexed earnings spread across the top 35 years. A single year of $42,000 in indexed earnings replacing a zero raises AIME by $100 — and $100 is exactly what the three tiers price so differently.
The bend points can also be read annually. The first, $1,286 a month, is $15,432 a year of indexed earnings; the second, $7,749 a month, is $92,988. The 2026 contribution and benefit base, the ceiling on earnings subject to Social Security tax, is $184,500 according to the Social Security Administration table of the Contribution and Benefit Base. The 15 percent tier therefore begins at just over half the taxable maximum, at 50.4 percent of it. A career spent near the cap puts most of its AIME in the tier that credits 15 cents.
Two computations the agency publishes
The Social Security Administration posts worked examples each year, and they show the tier effect with nothing assumed.
Case A is a worker first eligible in 2026 with AIME of $5,825, which sits between the two bend points. The first tier is 0.9 times $1,286, or $1,157.40. The second is 0.32 times the $4,539 lying between the bend points, or $1,452.48. The sum is $2,609.88, and the primary insurance amount after rounding down to the next lower dime is $2,609.80. Note the proportions: the first $1,286 is 22.1 percent of this worker's AIME but produces 44.3 percent of the PIA.
Case B is a worker first eligible in 2021 with AIME of $11,463, above that year's second bend point of $6,002. The first tier is 0.9 times $996, or $896.40. The second is 0.32 times $5,006, or $1,601.92. The third is 0.15 times $5,461, or $819.15. The sum is $3,317.47. The agency reports the PIA after the cost-of-living adjustments for 2021 through 2025 as $4,152.40, and the benefit at a full retirement age of 66 and 10 months as $4,152.00. Both cases are on the Social Security Administration page of Benefit Computation Examples.
Case B is where the ratios pull apart. The $5,461 of AIME above the second bend point is 47.6 percent of this worker's average indexed monthly earnings and yields 24.7 percent of the PIA. The $996 below the first bend point is 8.7 percent of AIME and yields 27.0 percent of the PIA. Under a tenth of the earnings outweighs nearly half of them.
The same $100 is worth $90, $32, or $15
Read as a marginal rate, the formula is unusually blunt. An added $100 of AIME below the first bend point adds $90.00 to the monthly PIA. The same $100 landing between the bend points adds $32.00. Above the second bend point it adds $15.00. Nothing else in the computation varies: the tier is decided by the total, not by which job or which year the earnings came from.
This is why an extra year of work produces such different answers for different workers. For someone with gaps in the top 35 years, replacing a zero can move AIME through the 90 or 32 percent tiers. For someone with 35 full years near the taxable maximum, the increment sits in the 15 percent tier. The formula is doing what it was designed to do: replace a larger share of low career earnings than of high ones.
Bend points move on wages, benefits in payment move on prices
The bend points ride the national average wage index. The second bend point for 2026 sits 4.84 percent above the second bend point for 2025, and the national average wage index rose 4.84 percent in 2024, per the Social Security Administration series on the National Average Wage Index. That is not a coincidence; it is the indexing formula showing through.
The cost-of-living adjustment rides prices instead. The agency states the basis: “COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).” The comparison is third quarter against third quarter, and the 2.8 percent adjustment that reached January 2026 payments came from a third-quarter 2025 CPI-W average of 317.265 against 308.729 a year earlier, as set out on the Social Security Administration page for the Latest Cost-of-Living Adjustment. CPI-W itself is produced monthly by the Bureau of Labor Statistics Consumer Price Index program.
Placed side by side for eleven years, the two series rarely agree. The bend-point column below is the increase in the second bend point for that year of eligibility; the COLA column is the adjustment that reached the January payment of the same year.
| Year | Second bend point | Bend point increase | COLA in January |
| 2016 | $5,157 | 3.55% | 0.0% |
| 2017 | $5,336 | 3.47% | 0.3% |
| 2018 | $5,397 | 1.14% | 2.0% |
| 2019 | $5,583 | 3.45% | 2.8% |
| 2020 | $5,785 | 3.62% | 1.6% |
| 2021 | $6,002 | 3.75% | 1.3% |
| 2022 | $6,172 | 2.83% | 5.9% |
| 2023 | $6,721 | 8.90% | 8.7% |
| 2024 | $7,078 | 5.31% | 3.2% |
| 2025 | $7,391 | 4.42% | 2.5% |
| 2026 | $7,749 | 4.84% | 2.8% |
In 2016 the second bend point rose 3.55 percent while the adjustment reaching January payments was zero. In 2022 the order reversed: the bend point rose 2.83 percent against a 5.9 percent COLA. In 2023 the two nearly met, at 8.90 and 8.7 percent. In 2026 the gap is back to roughly two percentage points, 4.84 against 2.8.
Neither index describes the other, and a worker meets both in sequence: the wage index sets the bend points that apply at 62, and the price index adjusts the resulting PIA every year afterward.
Claiming early scales every tier by one factor
The reduction for claiming before full retirement age is 5/9 of one percent for each of the first 36 early months and 5/12 of one percent for each additional month, as published by the Social Security Administration on Early or Late Retirement. For a full retirement age of 67, claiming at 62 is 60 early months: 36 months at 5/9 of one percent is 20.00 percent, and 24 months at 5/12 of one percent is 10.00 percent, for 30.00 percent in total. Anyone who turns 62 in 2026 was born in 1964, so a full retirement age of 67 is the relevant case.
The agency applies that to Case A directly: “the benefit amount for case A is reduced for 60 months of early retirement. The $2,609.80 PIA is thus reduced to a monthly benefit of $1,826.00.” The monthly benefit is rounded down to the next lower dollar.
Because the reduction operates on the whole PIA, it scales the marginal rates proportionally rather than changing their order. At 62 with a full retirement age of 67, 90 cents becomes 63 cents, 32 cents becomes 22.4 cents, and 15 cents becomes 10.5 cents. Delayed retirement credits work in the opposite direction after full retirement age. What neither adjustment touches is which tier an added dollar of AIME falls into. That was settled by the size of AIME and by the year of eligibility.
Numbers to Re-check
| Figure | Basis in this article | Where to verify | When it changes |
| First bend point $1,286 | 2026 year of eligibility | SSA, Primary Insurance Amount | Announced each October for the following year |
| Second bend point $7,749 | 2026 year of eligibility | SSA, Benefit Formula Bend Points | Announced each October for the following year |
| Tier percentages 90 / 32 / 15 | Statutory, not indexed | Social Security Act, Section 215(a)(1)(A) | Only by act of Congress |
| National average wage index $69,846.57 | 2024 index, used for 2026 eligibility | SSA, National Average Wage Index | Published each autumn for the prior year |
| Cost-of-living adjustment 2.8% | December 2025 benefits, payable January 2026 | SSA, Latest Cost-of-Living Adjustment | Announced each October |
| Contribution and benefit base $184,500 | 2026 calendar year | SSA, Contribution and Benefit Base | Announced each October |
| Early claiming reduction 30.00% | Age 62, full retirement age 67 | SSA, Early or Late Retirement | Varies with birth year, not annually indexed |
Where This Doesn’t Apply
The bend points quoted here belong to one cohort. They apply to a worker who attains age 62, becomes disabled before 62, or dies before 62 during 2026. A worker who reached 62 in an earlier year keeps that year's bend points permanently, which is why Case B above still runs on the 2021 pair. Anyone reading this before turning 62 will use amounts that have not been published yet.
The three-tier formula produces the worker's own primary insurance amount. Spousal, survivor, and dependent benefits are computed from that amount but by separate rules, and a family maximum with its own distinct set of bend points can cap the total paid on one earnings record. Disability benefits use the same percentage structure but a shorter elapsed-years computation instead of a flat 35 years, so the AIME arithmetic above does not describe them.
Several things sit outside the formula entirely and can change what actually arrives each month. The retirement earnings test can withhold benefits before full retirement age. Federal income tax on benefits, Medicare premiums deducted from the payment, and any voluntary withholding all operate after the PIA is computed. State treatment of retirement income varies and is not addressed here at all.
Finally, the marginal comparison assumes an added year raises AIME, which it may not. If a worker already has 35 indexed years above what a new year would contribute, that year replaces the lowest of the 35, and only the difference flows into AIME. The tier depends on the lifetime average rather than the current paycheck, so two workers on the same salary can land in different tiers.
This article explains how the rules are written. It is not tax, legal, or insurance advice, and it does not account for any individual situation. Amounts and thresholds change; verify the current figures at the sources listed above before acting, and consult a qualified professional about a specific benefit claim.
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