Observations: How Much Will You Receive in Social Security Income?

Friday, February 22, 2013

How Much Will You Receive in Social Security Income?

(Last updated December 2020)

Social Security is a key component of most people's retirement plan. Here's a quick estimate of the retirement benefits under the current rules.

Percent of Salary Replaced by Social Security Retirement Benefits

How much will I receive in Social Security? what percent of my income will Soc Sec replace? 2020

Percent of Salary Replaced by Social Security (approx)

The Percentage of Your Salary Replaced by Social Security is Determined by Your Salary Level

The chart above (click to expand) shows the approximate percent of your salary that Social Security will replace if you take full retirement at age 66. The actual calculation is complicated, and is based upon your lifetime earnings. For these estimates, I have assumed that you earn your current salary, adjusted for inflation, for the duration of your career (all previous and future years). The point here is to see the big picture; for an estimate specific to your situation see the links at the end of the post.

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 around 90% of their eligible salary. That appears to be the maximum salary replacement level.

At the high end, the maximum Social Security retirement income is around $35,000 a year. And, it's the same for everyone earning over around $120,000/year. On the graph, at $120,000, Social Security replaces 29% of 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 14%; for those earning $500,000 (not shown on the chart) the replacement rate is about 7%. There is no minimum salary replacement level.

Using Percent of Salary vs Actual Social Security Income/Benefits

I'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.

Caveat

So, 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 for seeing the big picture.

Social Security Related Links
Social Security Income Estimator : use this official SSA site for more accurate personal results.

I used the approximations from this site to develop the graph above.

Related Materials

How Much Money Will You Need to Retire?

What Percent of Your Salary Should You Save for Retirement? (by starting age)

How Much Should You Have in Retirement Savings? (by age)

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Copyright © 2013 Last modified: 12/5/2020