Covered Earnings

AAA

DEFINITION of 'Covered Earnings'

The total amount of an employee's pay that is eligible for use in the calculation of retirement benefits. Generally, the bulk of covered earnings arises for the employee's base pay; however, other types of compensation can be considered as part of the covered earnings amount. In the United States, covered earnings are work-related earnings that are subject to Social Security taxation.

INVESTOPEDIA EXPLAINS 'Covered Earnings'

Covered earnings typically include most types of wage income and any self-employment income. Some exceptions include earnings from certain state and local governments, and from railroads. Retirement benefits, whether from Social Security or pensions, are based on the amount of money the worker has earned and the amount that was paid towards the retirement plan.

RELATED TERMS
  1. Social Security Benefits

    The monetary benefits received by retired workers who have paid ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Social Security Administration ...

    A U.S. government agency created in 1935 by President Franklin ...
  6. Other Post-Retirement Benefits

    Benefits, other than pension distributions, paid to employees ...
Related Articles
  1. Tips On How To Use IRAs To Boost Retirement ...
    Retirement

    Tips On How To Use IRAs To Boost Retirement ...

  2. Managing Income During Retirement
    Budgeting

    Managing Income During Retirement

  3. 6 Retirement Savings Tips For 45- To ...
    Savings

    6 Retirement Savings Tips For 45- To ...

  4. Will Your Retirement Income Be Enough?
    Retirement

    Will Your Retirement Income Be Enough?

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center