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. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Social Security Administration ...

    A U.S. government agency created in 1935 by President Franklin ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Other Post-Retirement Benefits

    Benefits, other than pension distributions, paid to employees ...
  6. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
Related Articles
  1. Retirement

    Tips On How To Use IRAs To Boost Retirement Savings

    According to the Trustees of the Social Security Fund, the fund will be depleted by 2037. Are you ready?
  2. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  3. Savings

    6 Retirement Savings Tips For 45- To 54-Year-Olds

    Now is the time to kick savings into high gear. Find out how.
  4. Retirement

    Will Your Retirement Income Be Enough?

    Find out how to determine whether you're on the path to a comfortable retirement, or financial ruin.
  5. Retirement

    Introduction To Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  6. Options & Futures

    Retirement Planning Basics

    Realizing your post-work goals need not be daunting. We'll tell you everything you need to know to get - and stay - on track.
  7. Credit & Loans

    Reverse Mortgages: How To Find A Good One

    Finding a reverse mortgage generally means using a lender that specializes in them. Here's how to find a reputable one.
  8. Retirement

    Strategies To Build Your Retirement Portfolio

    Retirement indexes are designed to estimate how much an investor would need to have saved today to generate annual income in retirement, starting at 65.
  9. Investing

    Are You An Investor Seeking For More Income?

    For income-seeking investors, it's hard to turn down a double-digit dividend yield like that of Prospect Capital Corporation .
  10. Professionals

    Why Auto-Enrollment Will Save Your Retirement

    Savers need all the help they can get, even if it amounts to an offer they can't refuse. That's why the biggest improvement to 401(k)s is auto-enrollment.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center