When the topic of the American retirement system comes up, there's often a retort: "How much pension do Americans receive?" Let's explore today how much Americans contribute to their pension insurance and how much they can receive after retirement. Is the cost-effectiveness high? #How Much Can Americans Get After Retirement#

Eligibility for Receiving a Pension in the United States?

To theoretically receive a pension in the United States, one must have accumulated 40 qualifying credits (QCs) for pension eligibility. Relative to the income levels in the U.S., it's relatively easy to earn these credits. In a year (2023), contributing at least $1,640 (equivalent to 11,700 RMB) will earn you one credit.

Given that the U.S. social security tax rate is 12.4% (6.2% from both the individual and the employer), individuals with an annual income exceeding $13,200 can accumulate one QC. Those with an annual income above $26,400 can accumulate two, and those earning more than $52,800 can accumulate more than four (but no more than four in a single year).

The retirement age for receiving a full pension in the U.S. is 66 for those born between 1943 and 1954. It is possible to retire three years earlier, but the pension will be reduced by a certain percentage for each month earlier, up to a maximum reduction of 20%.

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Calculating the U.S. Pension

Since Americans can delay retirement and work into their seventies or eighties if they meet the conditions, the working years might generally be quite long. However, the U.S. pension calculation only considers the highest indexed earnings from the 35 best years.

Of course, it is nearly impossible to avoid social security taxes in the U.S.; there is no situation where one can choose not to pay. But one can continue to work while receiving a pension. Pensions exceeding a certain level are also subject to personal income tax, and if the pension and wage income are high, the pension will be reduced accordingly.The United States' pension system has two calculation thresholds. Based on an individual's indexed monthly earnings over 35 years (if less than 35 years, it is still averaged over 35 years, resulting in a much lower income). The portion below the first threshold is calculated at 90%, which is the basic guarantee. The part between the first and second thresholds is calculated at 32%, and the portion from the second threshold to the cap is only calculated at 15%. In this way, the maximum pension in the United States for 2024 is $3,743. The average pension income for individuals is $1,899.16.

In reality, if we accumulate 40 credits based solely on the minimum wage level, the final pension received can also reach around $1,000.

The cost-effectiveness of U.S. pensions.

For those with low incomes, the part below the first threshold is naturally the most cost-effective. As income increases, the cost-effectiveness will decrease.

To retire and receive a pension of around $1,900, which is the average level, the annual income should be around $40,000. If calculated at a rate of 12.4%, at least $173,600 in social security taxes would need to be paid over 35 years.

Retiring at 66, assuming an average of 14 years of receiving a pension, the total pension amount received would be $319,200.

To be honest, the ratio of contributions to benefits is less than 1:2. As long as the collected social security taxes are invested annually, the returns will far exceed the total amount of the pension received.

In fact, the U.S. Social Security Act includes not only old-age pensions but also survivor benefits and disability insurance.Overall, the insurance system in the United States is designed with the purpose of offering low cost-effectiveness and basic coverage. If individuals desire higher retirement security or accumulation, they can participate in the 401k plan and establish an Individual Retirement Account (IRA). #Top Headline Creation Challenge#