How Much Pre-Retirement Income Does Social Security Replace?

Alicia H. Munnell Mauricio Soto



Do today’s retirees have sufficient income to meet their needs? One common way to address this question is to determine a household’s “replacement rate.” The replacement rate gauges the extent to which retirement income allows workers to maintain their pre-retirement standard of living. In the U.S. retirement income system, Social Security is the single most important source for most people. It provides a basic level of replacement, upon which individuals can build through additional saving. This brief addresses the question of how much pre-retirement income Social Security replaces for current recipients. Subsequent briefs will provide a more comprehensive evaluation of replacement rates by including income from employer-sponsored pensions, other savings, and housing equity, as well as Social Security.

The first section of this brief explains the concept of a replacement rate and discusses how much people need for a comfortable retirement. The second section describes how Social Security replacement rates are constructed for this analysis and then reports results for individuals and households. The final section summarizes the key findings.