Social Security Benefits

We often do not realize how important Social Security benefits are. Social Security represents the largest source of retirement income for 53% of married couples and 74% of unmarried people. Social Security is one of the only sources of guaranteed income. Since Social Security adjusts each year as cost of living increases, retirees can count on their payments to keep up with inflation and the cost of goods needed for the rest of their life.

Role of Social Security Benefits

While Social Security isn’t designed to be a person’s entire retirement income, it is designed to replace between 27% and 41% of a person’s income before retirement. Here’s a small sample of how Social Security is designed to replace a person’s pre-retirement income. You’ll notice it’s designed so lower-income folks receive a larger percentage of their income.

Salary before Retirement Monthly Social Security Payment First Year Social Security Payments Replacement Ratio
$30,000 $1,014 $12,168 41%
$40,000 $1,224 $14,688 37%
$60,000 $1,376 $16,512 28%
$118,500 $2,642 $31,956 27%

It’s very important to note that folks earning more than the Social Security cap limit of $118,500 stop paying Social Security tax on their earnings above that limit, but keep in mind their Social Security payment is maxed out at $2,642 as of 2018.

Determine Your Social Security Benefits

Have questions about Social Security benefits? Use our FMF Social Security Analyzer for information about retirement, disability, survivor, and dependent benefits.