One of the most important retirement planning tools is now available online. Earlier this year, the Social Security Administration (SSA) began providing online access to Social Security statements through a “My Social Security” account.
The statements, which were previously mailed annually prior to your birthday, include a history of earnings, as well as an estimate of your retirement, disability and survivors benefits. This information is an indispensable part of personal financial planning by making available essential data about future retirement income and serving as an unmistakable reminder of the need for personal savings to supplement those benefits.
A survey by SSA to determine the effectiveness of the statement as an educational tool found a clear link between receipt of the statement and understanding of Social Security benefits. More than half of those who read the statement reported that as a result, they increased their savings rate or revised their financial plans for the future. Twenty-five percent said they contacted a personal financial adviser.
As part of a 1989 law intended to help educate workers about their benefits and allow them to review the accuracy of their earnings record for calculating benefits, in 1999 SSA began mailing workers age 25 and older annual statements of their estimated Social Security benefits (from 1995 to 1999 the mailings were only sent to those over age 60). In 2010, more than 158 million statements were mailed to workers.
In April 2011, the SSA stopped mailing annual benefit statements due to budget constraints and an effort to save approximately $70 million per year in printing and mailing costs. However, it left workers without any reporting about their benefits and the arduous task of contacting the SSA to simply confirm that wages had been accurately recorded.
In February 2012, SSA resumed mailing paper statements to workers close to retirement (age 60 and older if they are not already receiving Social Security benefits). Later this year, the SSA will initiate a one-time mailing to workers on their 25th birthday.
In May, the SSA launched an online platform so that workers over the age of 18 would have access to information about their earnings history and estimated Social Security benefits. Because these benefits are based upon average earnings, the statements should be checked for accuracy annually. The online statement can be saved or printed for future use.
The process for obtaining the online statements begins by going to the Social Security web site (ssg.gov) and clicking the “Get your Social Security Statement online” link to create a My Social Security account. Within minutes you are provided your estimated benefits and earnings record, as well as access to an online version of the previously mailed paper statement.
The statement includes a year-by-year history of earnings, the total amount of Social Security and Medicare taxes paid through the last year reported, as well as estimates of monthly retirement, disability, and survivors benefits based upon current earnings. Retirement benefit estimates are provided for age 62, full retirement age (now 66, gradually increasing to 67 for people born in 1960 or later), and age 70. Notably, if the earnings record is not correct, you will still need to call or write the SSA to resolve the problem.
The My Social Security accounts are waiting to be claimed. If you are concerned about someone accessing your account, you should claim your account with your Social Security number and then take advantage of the security settings available through the site. You can also request that the system send a text message to a specified cell phone every time anyone logs into your account so you will know immediately if your account has been breached.
The benefit statements are an important part of the Social Security program by giving workers ownership over their contributions and helping to plan for retirement. In the introduction to the statement, the SSA Commissioner states: ”Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You will also need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.”
For most retirees, future Social Security benefits are a significant component of overall retirement planning. It is imperative that you understand how Social Security benefits factor into your retirement income needs.
This article is for informational purposes only and is not financial, legal, or tax advice. Please consult with your adviser before making any decisions.
David M. Taube, CFA, is CEO and Chief Investment Officer of Kalorama Wealth Strategies, LLC, a fee-only investment advisory and financial planning firm in the District. Reach him at 202-550-7262 or email@example.com.
Directory powered by Business Directory Plugin