Once your Average In­dexed Monthly Earnings (AIME) is calculated, the Social Security Administration applies a percentage, called a Replacement Rate, to arrive at your monthly social security statement of benefits amount. The average Replacement Rate is 40 percent. However, the rate tends to be higher for low-income workers and lower for higher income workers. In this progressive way, lower-paid workers—who in theory would have less opportunity to save—get proportionally more of their incomes replaced by Social Security. (more…)

If you check your paycheck stub, you find an entry labeled FICA, which is an acronym for Federal Insurance Contributions Act. Your “contribution” is matched by your employer and is deposited in the Social Security Trust Fund. It shows you how much money was paid into the Trust Fund by employers, employees, and the self-employed in 1998 (the figures used are from the IRS). (more…)