	Introduction

Social Security, which paid about $989 billion in benefits in 2018, is the largest program in the federal budget in term s of outlays. Most Social Security beneficiaries are retired or disabled workers, whose monthly benefits depend on their past earnings, their age, and other factors. Benefits are also paid to workers' dependents and survivors, based on the earnings of the workers upon whose work record they claim. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035. For both of those reasons, Social Security is of ongoing interest to policymakers. Most proposals to change Social Security outlays would change the benefit computation rules. Average Indexed Monthly Earnings

The first step of computing a benefit is determining a worker's average indexed monthly earnings (AIME), a measure of a worker's past earnings. For example, the AIME for a worker who died at 61 is based on 34 computation years. Primary Insurance Amount

The next step in determining a benefit is to compute the primary insurance amount (PIA) by applying a benefit formula to the AIME. Benefits are based on covered earnings. For people with an FRA of 66, therefore, monthly benefits are 75% of the PIA for those who claim benefits at the age of 62 and 132% of the PIA for people who wait until the age of 70 to claim (see Figure 2 ). For example, someone with an FRA of 66 and who claims at age 62 will receive a monthly benefit equal to 75% of the PIA. A widow(er)'s base benefit is 100% of the worker's PIA. The base benefit for children of a retired or disabled worker is 50% of the worker's PIA, and the base benefit for children of deceased workers is 75% of the worker's PIA. Other Adjustments to Benefits

Other benefit adjustments apply in certain situations, notably 
the windfall elimination provision (WEP), which reduces benefits for worker beneficiaries who have pensions from employment that was not subject to Social Security payroll taxes; the government pension offset (GPO), which reduces Social Security spousal benefits paid to people who have pensions from employment that was not subject to Social Security payroll taxes; the retirement earnings test , which results in a withholding of monthly Social Security benefits paid to beneficiaries who are younger than the full retirement age and have earnings above a certain level; and the maximum family benefit , which limits the amount of benefits payable to a family based on a worker's record. In some cases, a portion of Social Security benefits may be subject to federal income tax. Taxation is not a benefit adjustment, but it does affect the net income of beneficiaries.
Social Security, the largest program in the federal budget (in terms of outlays), provides monthly cash benefits to retired or disabled workers and their family members as well as to the family members of deceased workers. In 2018, benefit outlays were approximately $989 billion, with roughly 63 million beneficiaries and 176 million workers in Social Security-covered employment. Under current law, Social Security's revenues are projected to be insufficient to pay full scheduled benefits after 2035.
Monthly benefit amounts are determined by federal law. Social Security is of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policymakers have considered numerous proposals to change its benefit computation rules.
The Social Security benefits that are paid to worker beneficiaries and to workers' dependents and survivors are based on workers' past earnings. The computation process involves three main steps
First, a summarized measure of lifetime earnings is computed. That measure is called the average indexed monthly earnings (AIME). Second, a benefit formula is applied to the AIME to compute the primary insurance amount (PIA). The benefit formula is progressive. As a result, workers with higher AIMEs receive higher Social Security benefits, but the benefits received by people with lower earnings replace a larger share of past earnings. Third, an adjustment may be made based on the age at which a beneficiary chooses to begin receiving payments. For retired workers who claim benefits at the full retirement age (FRA) and for disabled workers, the monthly benefit equals the PIA. Retired workers who claim earlier receive lower monthly benefits, and those who claim later receive higher benefits.
Retired worker benefits can be affected by other adjustments. For example, the windfall elimination provision can reduce benefits for individuals who receive a pension from non-Social Security-covered earnings, and benefits can be withheld under the retirement earnings test if an individual continues to work and earns above a certain amount. Although not an adjustment, Social Security benefits can be subject to income tax, thereby affecting the beneficiary's net income.
Benefits for eligible dependents and survivors are based on the worker's PIA. For example, a dependent spouse receives a benefit equal to 50% of the worker's PIA, and a widow(er) receives a benefit equal to 100% of the worker's PIA. Dependent benefits may also be adjusted based on the age at which they are claimed and other factors.