Investopedia

Continue to Site »

Replacement Rate

Filed Under »
Dictionary Says

Definition of 'Replacement Rate'

The percentage of a worker's pre-retirement income that is paid out by a pension program upon retirement. In pension systems where workers get substantially different payouts due to their differing incomes, replacement rate is a common measurement which can be used to determine the effectiveness of the pension system. In some cases, workers can use replacement rates to help estimate what their retirement income might be from the plan.
Investopedia Says

Investopedia explains 'Replacement Rate'

Replacement rates are commonly mentioned in the debate over the U.S. Social Security system. Under the current Social Security law (as of 2010), replacement rates are at about 45% for the average worker. The replacement rate can allow for individuals to plan for retirement. For example, a worker with pre-retirement income of $100,000 their can estimate their pension at around $45,000 at the current 45% replacement rate.

Articles Of Interest

  1.

    Combining Your Plan Assets? Not So Fast!

    You might reduce the costs of maintaining more than one account, but you could also be forfeiting tax benefits.

  2. Tough Times: Should You Dip Into Your Qualified Plan?

    401(k)s, pensions and profit-sharing plans can be a source of cash, but there are consequences to this option.

  3. Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.

  4. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  5. Post-Grad Degrees That Pay The Highest

    A post-graduate degree could be well worth the extra time and expense.

  6. The Highest Paying Jobs In 2013

    With the U.S. economy experiencing mixed fortunes, this article looks at the highest-paying jobs for 2013 and how job-seekers can capitalize.

  7. Top-Paying Contract Positions

    A number of contract positions pay more than their salaried counterparts.

  8. 3 Jobs Few People Want

    Despite the unemployment rates in the U.S., few people want to do these jobs.

  9. College Degrees Of The 1%

    Find out which college majors give you the best odds of joining the wealthiest percentile of Americans.

  10. $1 Salaried CEOs Making Millions

    Some CEOs who are paid $1 annually are actually among the highest-paid when all forms of compensation are taken into account.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center