By Daniel C. Romano, CPA, PFS Partner at Gray, Gray & Gray, LLP Back in 2011, the federal government, in an effort to save money, stopped printing and mailing annual Social Security benefit estimate statements.
Those paying into the program could still get their estimated benefits information online, but relatively few taxpayers registered. Last year Congress passed a bill requiring Social Security to resume the mailing of printed statements every five years for most (but not all) participants age 25 and older, and annually for those 60 and older.
What should you expect when you receive your statement of expected Social Security benefits? And what should you do with it? The first thing to do is read your earnings record to make sure the Social Security Administration has your numbers right. Checking this information is very important, as any errors may result in a significant decrease in the benefits you receive.
Assuming you qualify for Social Security, the Social Security Administration figures out your benefits based on your average earnings over your highest 35 years of earnings during your lifetime. So any underreporting will affect how much you will receive. It is strongly recommended that instead of waiting for your printed statement every five years you log on to the online version annually to examine it for errors. Do this while you are preparing your tax return so that you have easy access to your financial information. If you discover that any earnings before last year are incorrect, go into your files and pull out your W-2 or tax return for the years in error. Then either call Social Security (800-772-1213) or write to them right away (Social Security Administration, Office of Earnings Operations, P.O. Box 33026, Baltimore, MD 21290-3026) and ask them to correct the error.
The monthly estimated benefit printed in your statement will give you a good idea of how much you should expect to receive from Social Security, which will vary depending on the age you begin claiming your benefits. The statement will show clearly that those taking retirement benefits at the earliest possible age (62) will receive less per month than people who wait until the full retirement age (currently 66 years, rising to 67 years for people born in 1960 or later). Waiting until you are 70 means an even larger monthly check. Keep in mind that these figures are estimates, not guarantees. They are also listed in today’s dollars and are not adjusted for any projected inflation or modifications made to the Social Security program by Congress.
Also, your statement does not include estimated Social Security benefits that are due to your spouse, which should be considered as part of your overall retirement planning process. With your estimated Social Security in hand, you’ll be able to make some important decisions. These include choosing the best age at which to start receiving benefits, and how much you might need to save using other means (such as an IRA, 401(k), or pension plan) to have sufficient money to enjoy the retirement you want.
You should discuss this in detail with your financial advisor, as Social Security can be an important component of your overall retirement plan. For more information on Social Security and retirement planning, please contact Gray, Gray & Gray at (781) 407-0300.