Yep, SS wages are indexed to inflation and whenever you decide to take SS, then calculation is made at that point looking at those prior earnings in retrospect (more or less). There is the inflation multiplier for each year (by dividing wage indices), which is easy to do when looking back. For looking ahead, it's guesswork. I like calculating future earnings in nominal terms on purpose as it gives me a "worst case" of sorts since inflation is > 0. I.e. My actual payout will be higher so for planning purposes I like thinking of what I calculate as "the least amount" that I'll receive assuming no reduction in benefits which is a different can of worms. Every other spreadsheet, calculator, etc. may have different assumptions for the future inflation as well as future earnings (e.g. a 3% raise each year?) and how to calculate them.

https://www.ssa.gov/oact/cola/AWI.html

https://www.ssa.gov/OACT/COLA/Benefits.html

https://www.ssa.gov/OACT/COLA/piaformula.html

Thanks! I had no idea it was so complex. I expected income-tax-for-federal-and-two-states complex, which I can (by now) easily handle. But this is a whole new level! Having said that, it seems like assuming that everything stays the same (no inflation, no change in average wage index, etc) would provide a reasonable lower bound for projections.

It is a reasonable projection. The wage index is also a way of calculating inflation, so if your actual payout at retirement age is higher when accounting for the average wage index, chances are your money will be worth less by an equal amount.

When we assume everything stays the same we are implicitly assuming the gains from the wage index matches inflation, and this is a good assumption. That's why I hesitate to call it a floor.

When looking at or estimating future earnings, I agree with you. But looking at a person's wage history in nominal terms surely does underestimate what the actual SS benefit would be, no?

For example: I'm 35 and have 20 years of SS wages that I've paid FICA tax on. My SS FRA is 67. If I think of everything right now in terms of 2021 dollars, I agree that whatever SS wages I have from ages 36 to 67 I don't need to worry about assuming what my avg wage increase will be nor worry about what the future wage indices will be since as you point out, these roughly will cancel each other out and I can just think in terms of 2021 dollars. What I'm talking about are my wages that are already behind me - I treat those as nominal even though the SSA would be multiplying by a ratioed factor greater than 1 to transform them into 2021 dollars, thus underestimating my actual benefit (again, assuming no program cuts or major changes).

If someone is in their first year of earning wages that they pay FICA tax on - yes, it's silly to think of the nominal earnings as a floor when estimating SS benefits as it could equally be called the ceiling as the real=nominal in year 1. But as a person gets deeper into their HI-35 and closer to FRA, all of those old earnings in nominal terms from the year in which they were earned are underestimating the benefit payout. I'm not trying to convince anyone to record this way, it's just how I like to think about it when updating my projections each year - in fact, I encourage people to use the tools and estimators that do all of the inflation-adjusted work for you and if people haven't already, to sign up on the SSA website to confirm their earnings history, understand the projections and assumptions for benefits, and ingest all the free information there.

As to the OP, yes wage cap increases will slowly bump up your benefits if you're earning right at the new higher cutoffs but these are pretty much all dollars at the 15% bend point. So yes, your benefits are rising (outputs going up) but the FICA taxes are really going up (inputs really going up). You're not coming out behind per se, just not getting as big of a bang for your SS buck as those with lower incomes. It's a nice problem to have!