Percent of Salary Replaced by Social Security Retirement Benefits
|Percent of Salary Replaced by Social Security|
The Percentage of Your Salary Replaced by Social Security is Determined by Your Salary LevelThe chart above (click to expand) shows the approximate percent of your salary that Social Security will replace if you retire at age 65. The actual calculation is complicated, and is based upon your lifetime earnings (see links in related materials below). For these estimates, I have assumed that you will earn your current salary, adjusted for inflation, for the remainder of your career.
As you can see from the graph there are huge differences in the percent of your salary that Social Security replaces, depending upon your salary. At the low end of the scale, for salaries below $10,000, retirees receive about 78% of their eligible salary. That appears to be the maximum salary replacement level.
At the high end, the maximum Social Security retirement income is a little over $27,000 a year. And, it's the same for everyone earning over $115,000/year. For those earning exactly $115,000, the max Social Security check replaces 24% of their salary. Since the maximum payment is fixed, the percent replaced declines steadily from that point forward. For those earning $250,000 the replacement rate is about 11%; for those earning $500,000 (not shown on the chart) the replacement rate is 5%. There is no minimum salary replacement level.
Using Percent of Salary vs Actual Social Security Income/BenefitsI've used percent of salary rather than actual dollar amounts of your Social Security retirement benefits so that we don't have to worry about inflation. If we tried to calculate your actual salary and Social Security income, we'd need to know when you plan to retire, how much inflation will be between now and then, etc.
Instead, we have just assumed that your salary will keep pace with inflation, and that Social Security benefits will do the same.
CaveatSo, that's the rub. All of the calculations are based upon current rules. However, as we know, in order for Social Security to remain solvent, the rules will have to change at some point. Still, I think it's a good starting point.
Related MaterialsHow Much Money Will You Need to Retire?
What Percent of Your Salary Should You Save for Retirement? (by starting age)
- % to Save for Retirement, by starting age, with Social Security
- % to Save for Retirement: High-Income, with Social Security
- % to Save for Retirement, Without Social Security
How Much Should You Have in Retirement Savings? (by age)
- How Much Should You Have in Retirement Savings?
- How Much Should You Have in Retirement Savings? high-income
- How Much Should You Have in Retirement Savings? w/o Soc Sec
Social Security Income Estimator : the official SSA site. I used the approximations from this site to develop the graph above.
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