Social Security Point of the Day (SSPOD)
One thing about Social Security (or SocSec, as I like to refer to it) that most people expect is this: the more you make (while working), the more you get (as a retirement benefit).
Further, they expect that if you have consistently earned double what another person made while working, your SocSec benefit will be twice as high as the other person’s.
Right on the first point (sort of). Dead wrong on the second.
The Mercer 2005 Guide to Social Security and Medicare (primarily meant for employers–click HERE for more info) tells us that for two individuals retiring this year at the Full Retirement Age:
- if Person 1’s average annual earnings (adjusted for inflation) was $36,000, his individual benefit would be a bit under $16,000.
- if Person 2’s average annual earnings was twice as much ($72,000), his benefit would be a bit under $23,000.
So…the person who has paid twice as much into the system gets a benefit that’s not even 50% higher.
Remember, I’m just the messenger.
