How Much of Your Pre-Retirement Income Will Social Security Replace?
Social Security benefits are an important source of retirement income, but they can't be your sole source. That's because they aren't designed to replace enough of your pre-retirement income to maintain your standard of living.
The rule of thumb is that Social Security benefits replace around 40% of pre-retirement income. But that's not very accurate because they don't replace the same amount of income for people across all income levels. In fact, they replace a far larger percentage for lower- and middle-income workers than for high earners. It's important to understand just how much of your pre-retirement wages Social Security benefits will replace so you know how much you need to supplement them.
The chart below shows the amount of a career-average wage that you could expect Social Security to replace if you are a 65-year-old retiree in 2020, based on whether you have a low, middle, or high income or you earned up to the taxable maximum. That maximum is because each year there's an earnings threshold above which Social Security taxes are no longer collected; any earnings above that threshold don't count toward determining your average benefits over your career.
Source Fool.com
