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. Retirement

    What is a longevity annuity?

    Understand all the characteristics of a longevity annuity contract, the purpose of a longevity annuity and what type of investor it appeals to.
  8. Personal Finance

    How Minimum Wage Impacts Unemployment

    We explain how the minimum wage affects unemployment, public assistance, and the economy overall.
  9. Retirement

    Who is exempt from paying Social Security taxes?

    Learn about the groups of people who qualify for exemption from Social Security taxes, and explore the process of applying for exemption.
  10. Retirement

    How can I avoid paying taxes on my Social Security income?

    Learn how to calculate the percentage of Social Security income benefits that may be taxable, and discover strategies to reduce total taxes paid.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center