The Motley Fool Discussion Boards Previous Page Investing/Strategies / Retirement Investing URL:  http://boards.fool.com/0x6a74-jafo-ltltltiow-benefits-are-and-29028439.aspx Subject:  Re: Means Testing SS Date:  1/13/2011  4:24 PM Author:  JAFO31 Number:  68234 of 81340 0x6a74:JAFO: <<>> GH: {{{The "tip" is quite modest,}}}"just curious ...and numbers on how much of a 'tip'?"Almost 3:1 in favor of bottom from top to bottom and 2:1 in favor of bottom from middle to bottom and 1.5:1 in favor of middle from top to middle, all based upon percentage of income replaced.From my earlier post:"Social Security is expected to replace about 40 percent of pre-retirement earnings of average earners; 80 percent for the lowest earners; and 27 percent for those at the maximum taxable wage base of \$80,400, [this from some years ago] according to the Social Security Administration." [but relative percentages have not changed since then]http://cbs.marketwatch.com/news/story.asp?siteid=mktw&di......"The benefit formula is a three step formula based on AIME (Average Indexed Monthly Earnings). The annual earnings on which this average earnings figure is based have the same caps as were used on the tax side. The formula for the benefit is then 90% of the first \$x of AIME plus 32% of the next \$y of AIME plus 15% of the balance of AIME. x and y are indexed yearly."http://ssa.gov/pubs/10070.html [Looks like 2010 numbers to me]"Step 5:Multiply the first \$761 in Step 4 by 90%. . \$__________________ Multiply the amount in Step 4 over \$761 and less than or equal to \$4,586 by 32%. . . . . . . . . . . . . . . .\$__________________ Multiply the amount in Step 4 over \$4,586 by 15%. \$__________________ "AIME of \$4,586 equates to annual earned income of \$55k+ a littleAnd maximum AIME was \$8,900 (monthly equivalent of \$106,800 annual cap)If i did the math right, if monthly AIME were 4,583.33 (\$55k equivalent), benefits would be \$1908.05/month whereas if monthly AIME were \$8,900 (\$106.8 equialent) benefits would be \$2,547.15.The latter person paid almost twice as much SS tax (1.94x or 94% more) but receives only 33.9% more benefits (647.10/1908.05). 94/33.9 is a 2.77x tip. That might be "modest" in GH's world, but I do not consider it a "modest tip".Regards, JAFO Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us