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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 2013 with a lifetime of “medium” earnings (about $43,720 in 2012) would receive about $18,230 a year, which would replace about 42 percent of past earnings. A “low” earner who made about $19,670 in 2012 would receive about $11,070, which would replace about 56 percent of prior earnings. A worker who always earned the “maximum” taxable amount ($110,100 in 2012) would get benefits that replace about 26 percent of prior earnings.

Source: Annual Trustees' Report, Social Security Administration, 2013; Table V.C7

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