Average Monthly Earnings

What Does Average Monthly Earnings Mean?

Average Monthly Earnings is a statistic used by the Social Security Administration (SSA) to calculate an individual’s Social Security benefits. To determine this figure, the SSA considers the top-earning 35 years of a person’s career after age 21 and calculates a monthly average of their earnings.

Insuranceopedia Explains Average Monthly Earnings

Social Security is essentially insurance designed to protect retirees from poverty. While it helps retirees earn a stable monthly income once they become eligible, the amount they receive depends on their lifetime earnings. Therefore, the higher a person’s average monthly earnings, the more they will receive in Social Security benefits upon retirement. However, there is a maximum benefit limit, which was set at $2,663 per month as of 2015. Because Social Security alone usually does not replace a worker’s full pre-retirement income, many people supplement it with private retirement products such as annuities, which pay out a guaranteed monthly amount based on what you contribute rather than what you earned over your career. Retirees also commonly review their life insurance options for seniors to cover final expenses and leave money behind for a spouse who would otherwise lose part of the household’s Social Security income.