Your retirement income replacement ratio is the percentage of your preretirement income replaced by your retirement income sources. Retirement income sources would include Social Security or other governmental benefits, defined benefit type annuity plans, defined contribution account type plans, and individual retirement accounts. If your annual income immediately preceding retirement is $50,000 and your annual retirement income from all sources is $40,000, your retirement income replacement ratio would be 80% ($40,000 / $50,000 x 100%).
US Social Security is based on covered earnings paid to you during your working lifetime. For detailed information on US Social Security go to www.ssa.gov.