The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Replacement rates, which compare individuals' initial Social Security benefits with previous wages, are often used to determine whether or not recent retirees can maintain their preretirement standard of living. Replacement rates, however, can be unsteady measures. But such rates can also appear different over the course of retirement.
Analysts typically rely on a replacement rate determined at the specific moment of retirement.
Because initial Social Security benefits are based on wage-indexed earnings, the replacement rate relates the retiree s wages to those of the general population. If society has grown richer, the benefit reflects this. However, analysts seldom attempt to measure this type of relative replacement rate at any point during retirement. Relative replacement rates change during retirement because after the Social Security benefit is established, it grows at the slower pace of prices and only its real, not relative, value is maintained. Figure 1 displays the earnings pattern of an average-income worker, based on actual earnings records.