Covered Earnings

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.

BREAKING DOWN '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. Unit Benefit Plan

    An employer-sponsored pension plan that provides retirement benefits ...
  2. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  3. Taxable Wage Base

    Also known as the Social Security Wage Base, this base is the ...
  4. Accounting Earnings

    The amount of money a company has earned during a given period, ...
  5. Accrued Monthly Benefit

    The earned pension benefit that will be paid to an employee at ...
  6. Outside Earnings

    Income that temporarily reduces a retired individual's Social ...
Related Articles
  1. Saving and Spending

    How Working Longer Impacts Social Security

    A look at the impact of working longer on Social Security retirement benefits.
  2. Retirement

    Can Your 401(k) Impact Your Social Security Benefits?

    Find out why income from a 401(k) does not affect the amount of your Social Security benefits, but how it can impact your annual tax bill if you earn too much.
  3. Professionals

    III. How Benefits Are Calculated

    III. How Benefits Are Calculated
  4. Retirement

    When Do I Stop Paying Social Security Tax?

    Almost never, unless you belong to one of these special groups.
  5. Retirement

    How Social Security Benefits Are Estimated & Taxed

    The Social Security check you'll get depends on your work history, when you start claiming a benefit and these other factors.
  6. Retirement

    How Social Security Works for the Self-Employed

    As both employee and employer, you have to pay more in Social Security, but there are deductions that can help lighten the tax burden.
  7. Retirement

    Understanding Social Security Eligibility

    Who qualifies for Social Security payments and when can they get them?
  8. Professionals

    Other Employee Benefits

    Other Employee Benefits
  9. Financial Advisors

    How to Help Clients Plan a Phased Retirement

    The notion of phased retirement is gaining traction. Here's how advisors can help clients plan accordingly.
  10. Term

    What's a Qualified Retirement Plan?

    Employers establish qualified retirement plans to help their employees save money.
RELATED FAQS
  1. What is the difference between early retirement and full retirement as it applies ...

    If you were born in 1929 or later, you'll need forty Social Security credits to be eligible for Social Security retirement ... Read Answer >>
  2. How are Social Security benefits affected by your income?

    Understand the relationship between a worker's earned income and benefits he or she receives from Social Security in retirement, ... Read Answer >>
  3. Can I collect Social Security if I still have a job?

    Find out about some circumstances that would allow you to collect Social Security while you're working and how your benefits ... Read Answer >>
  4. What is the maximum I can receive from my Social Security retirement benefit?

    Understand the maximum Social Security benefit amount for someone retiring in 2016 at full retirement age and the basics ... Read Answer >>
  5. At what age will I be eligible for the maximum Social Security payout?

    The year you choose for collecting your social security will play a large part in determining how much money you'll receive ... Read Answer >>
  6. Are Social Security benefits affected by marriage?

    Find out why marriage does not affect your Social Security retirement benefits and what factors influence your maximum benefit ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center