#5 High-income earners get more perks, a downside for low-income people

Unfortunately, there are more downsides for people who have not had a high income during their working years than for those who did. This is because Social Security benefits are calculated based on the average income you have reported over your time in the workforce. What’s more, after you have reached the 40 credits needed to qualify, the additional ones you may earn have no weight when it comes to calculating how much you will get in benefits.

The equation to calculate the benefits is pretty complicated, but the easiest way to try to predict your benefit from your monthly average wages is: 90% of the first $896 you earn; 32% of the amount between $897 and $5,399; and then add them all with 15% of anything above $5,399. The sad reality is that the majority of Americans will not get to the 15% calculation because they do not earn enough for that.

Yet, the calculation means that if you had an average of $4,000 a month, your benefit would be less than $1,800. If you had less, you can imagine how easily that number would keep dropping. The more you were paid while working, the higher the benefit you will receive. Likewise, if you had an average income, your benefit will end up being smaller than expected.