June 10, 2011

How Much of Your Income Does Social Security Replace?

Social Security is a large part of retirement income for most Americans.   If you're planning for your retirement then it is useful to have an idea of how much your Social Security income will be.   I wrote before about exactly how your Social Security monthly benefit is figured.  It is pretty complicated.   Today I'll just give a rough figure for how much of your pre-retirement working wages Social Security typically replaces.

The Social Security site has a 'quick calculator' that will give a rough estimate of what your SocialSecurity benefit will be.  Using the calculator I found the Social Security monthly amounts for various income levels.   Then I figured how much of your working income that would equate to.   I just used the default of someone who is currently 61 years old and then got the standard SS rate for retirement at age 66.

Here's a table with the results:

Wages SS / Wages
$10,000 67%
$20,000 50%
$30,000 41%
$40,000 37%
$50,000 34%
$60,000 32%
$70,000 31%
$80,000 29%
$90,000 27%
$100,000 26%

And graphically:

As you can see the more you make the less of your income that Social Security replaces.  Of course your actual payments are bigger.   If your wages were $20,000 then the monthly check is $830 which is 50% of your income, but if you made $100,000 then you'd get $2130 from SS which is 26% of your wages.

Keep in mind that this is just a rough estimate.  Your individual situation will differ depending on how many years you worked and your exact income per year.   The quick estimator just makes blanket assumptions about the wage history to give its rough estimate.

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