Is There a Minimum Pension in the USA in 2019?

Statistics claim that, on average, most Americans spend around twenty years in retirement. That is a long time considering the benefits and funds needed to secure a quality and comfortable lifestyle. However, the retirement situation in the U.S. is quite a complicated matter involving a string of pension laws. 

In recent times, it’s been extremely difficult to live on a working-class job. Moreover, a middle-class lifestyle is tough to uphold with the average wages due to the economic climate. Retirement savings are one way to achieve financial stability in old age, but unlike other countries where state pensions are practically guaranteed, the U.S. does not hold a universal law concerning minimum retirement amounts. While the laws of countries like Finland, Switzerland, and Sweden ensure some form of state pensions for seniors based on old age, U.S. citizens have to form their own pension plans. 

So what are the main laws regarding retirement in America? And what’s the minimum pension in the USA in 2019? Is there a maximum? Take a look at this informative guide to find out. 

USA Retirement Basics

USA Retirement Basics

In general, USA retirement plans are financial systems that citizens can use to replace their income from employment while retiring.

The plans are chosen on an individual basis, and there are many different types. You’ve surely heard of the 401k, as it is the most common. In 2019, the choice of tax-advantaged agreements is quite vast. Choosing the perfect plan depends on tax treatment, long-term reserves, contribution limits, benefits, and many other factors. In addition, retirement plans can also be created by employers, insurance companies, as well as other organizations.

Those plans can be thought of as “pre-funded.” They differ from Social Security benefits, and that’s something we’ll cover later on. 


In America, social pensions are generally means-tested. This means that laws base eligibility on asset/income tests. When retired, former employees may receive compensation from employers, which is a private pension plan. Overall, pensions can be split into two types. The first is defined benefit. The second type is defined contribution. The plans are categorized into these two types depending on how their benefits are decided. The Department of Labor is the federal government institution in charge of regulating the plans under the ERISA law, which stands for Employee Retirement Income Security.


In case of a benefit plan, the compensation will be based on a fixed formula. The main factors are usually the employment/service time and total pay received. In general, the funds are usually set aside by employers and institutions each year. This is called a trust fund, and it specifically caters towards a specific plan. In most cases, there will be only one trust fund, meaning that employers will not create individual accounts for each employee. Then, it’s the employer’s responsibility to deposit real money into that trust fund. 


This second type, i.e., contribution plan, is based on individual accounts. That way, the benefit amounts depend on a participant’s contribution (deposited funds). In most cases, those funds can be used for investments. Therefore, the benefits will be determined by the success of the investments. 

Moreover, Section 414 defines this plan as “employer-sponsored” (IRS code). As for the contributions, they can be invested in the stock market for instance. The investment returns are then calculated. This applies to both gains and losses. 

Plans of this type have become increasingly common. Moreover, they are the more popular choice for the private sector. One of the reasons for that lies in the risk factor present in defined benefits. In fact, employers are recently turning to contribution plans over benefit arrangements due to the financial risk. This is why the 401(k) contribution is among the most popular. 

Lastly, cash balance plans offer a combination of the previous two plan types.

Retirement Accounts

As mentioned, there is a wide variety of plans in 2019. Here’s a list of the most common types: 

  • 401(k) Traditional — pre-tax contributions and tax-deferred basis growth. Withdrawals allowed after the age of 59.5. After age 70.5, minimum withdrawals (RMD) are required. Both types of distribution are taxable after. The contribution limits are between 19$–$25k annually, depending on the age. 
  • 401(k) Roth —  similar to the previous, but post-tax earnings are incorporated into the contributions. Then, individuals are not taxed later.
  • 401(k) Solo — managed by those who are self-employed. Higher contribution limits. 
  • 403(b) — these plans are much like the 401(k) but are only applied to specific employee types, such as educators, medical workers, nonprofits, educators, etc.
  • IRA, aka Individual Retirement Accounts — consists of Traditional, Roth, as well as Simple plans similar to the 401(k). They are not employer-sponsored and feature much lower contribution limits compared to the previous. The contributions are pre-taxed, but all of the funds come from the individual. 

As you can see, 59.5 is an approximate age when one can retire in the U.S. using one of the common plans above. 

Minimum Pensions? 

One could say that minimum pensions depend solely on the type of plan chosen and the contributions/benefits made.

If, for instance, you opt for a standard 401(k), you’ll need to add taxes after the withdrawals, which will diminish the return. In the case of the Roth plan, you’ll pay the taxes upfront, and your pension withdrawals will be tax-free. Therefore, the minimum will vary on an individual basis. However, there is a more coherent example of a minimum if we look into some Social Security benefits. 

Social Security Retirement Benefits

Overall, Social Security provides help to over 170 million U.S. citizens. This includes retirees, disabled people, deceased individuals, and the families of these citizens. On average, over 60 million citizens collect benefits monthly. Moreover, Social Security benefits are vastly different from the previously mentioned pensions. Citizens can pay Social Security taxes, in contrast to a funding plan, and that is the main difference. 

With Social Security, the average monthly pension can be around $1,400 in 2019 per person. Therefore, it’s slightly over the poverty level for individuals and two-person households. In 2018, the maximum Social Security payment for retirees was around $2,700.

Special Minimum Benefits

This is a plan that can be used as an example of a minimum pension in the United States. The minimum Social Security benefit was established in 1972. Namely, it requires full-time employment (11 years minimum) and minimum-wage earnings. After that, retirees will get a minimum amount on a monthly level. This amount often fluctuates due to inflation and is determined by the length of employment. In addition, the plan only applies to those with small incomes. The payments also depend on past earnings and when the benefits are claimed. They could be as insufficient as $41.90 (full retirement age and 11 years coverage) and $872.50 for 30 to 35 years and over coverage. It’s one form of a minimum amount one can get for retiring in the U.S.


As you’ve seen, it’s difficult to pinpoint the exact minimum pension in America. We’ve outlined some of the reasons why that is so and tried to give examples on some amounts that could be used as a reference. The reality is that there are plenty of prefunded arrangements for the middle-class, while others with a lower income will need to opt for Social Security. If you wish to retire comfortably, it’s best to plan earlier and gain a clear understanding of the available choices!