How Do Benefits Compare to Earnings?

Social Security retirement benefits are designed to replace part of a worker's earnings from work. The formula used to calculate these benefits takes into account lifetime earnings over 35 years. Social Security benefits replace a larger share of past earnings for low earners. While high earners receive larger benefits, their benefits replace a smaller share of what they had been making.

For example, a 65-year-old who retired in 2010 with a lifetime of “medium earnings” (about $41,068 in 2009) would receive about $16,752 a year, which would replace approximately 41 percent of past earnings. A lower earner who made about $18,481 in 2009 would receive around $10,164 annually, which would replace about 55 percent of past earnings. A worker who always earned the maximum that is taxed and counted for Social Security ($106,800) would receive a benefit that replaced about 28 percent of his or her past earnings ($26,292).

Source: Annual Trustees' Report, Social Security Administration, 2010; Table VI.F10

For more information, see:

• Social Security Benefits, Finances, and Policy Options: A Primer
• Strengthening Social Security for the Long Run, Social Security Brief No. 35
• Social Security: An Essential Asset and Insurance Protection for All
• Building on Social Security's Success, A Briefing Paper
• Social Security and Retirement Income Adequacy, Social Security Brief No. 25
• Survivor Benefits for Families of Deceased Servicemembers and Overseas Contract Workers, Social Security Brief No. 23
• Uncharted Waters: Paying Benefits from Individual Accounts in Federal Retirement Policy, Study Panel Report (Chapter Two)

Read what some NASI members think:*

• Dwight K. Bartlett: "Social Security Reform" (4/20/05)

* The views of NASI members are their own and not an official position of the National Academy of Social Insurance or its funders.