Back in the olden days, you used to receive an annual statement from the Social Security Administration detailing your benefits projected to your potential retirement age(s). Nowadays you can go online (www.SocialSecurity.gov) and request a current statement at any time. If you haven’t gone online for your statement, you should receive a mailed copy of the statement every five years.

While the statement is designed to be pretty well self-explanatory, I thought it might be beneficial to review the statement so that you know what the statement is telling you.

First Page

This page is your basic SSA boilerplate, explaining to you some of the current details of the Social Security system, including the services and tools that they have available to you.

In addition, SSA points out that Social Security benefits should be only a part of the overall retirement resources picture. On average, Social Security will replace about 40% of your annual pre-retirement earnings.

Second Page

Now we’re into the meat of the report. At the top of the page is the detail of your Estimated Benefits. These estimates assume that your current earnings rates continue until the projected ages. First are your Retirement Benefits – at Full Retirement Age (your FRA will be listed), at age 70, and at your early retirement age of 62 (if you’re not over this age already). These figures are helpful when planning retirement income, assuming that you expect to continue earning at your current income level until the projected age(s). You also must assume that the Social Security system will continue to pay out at the current rates to folks at your particular level of income in the future (but that’s a discussion for another time).

Next comes the section on Disability Benefits for you. This shows the amount of Social Security Disability Benefit that you are currently eligible to receive. (If you’re looking for a rough estimate of your current Primary Insurance Amount or PIA, this figure is a good estimate to use.)

The next section is for Family and Survivor’s Benefits – indicating the amount of benefit that your Child, your Surviving Spouse caring for your child under age 16 or who has reached Full Retirement Age would receive upon your death. In addition, your Family Maximum Benefit will be listed here as well.

Lastly in this top section, the statement provides you with information about whether you have earned enough credits to qualify for Medicare at age 65, followed by your birthdate and the income estimate that Social Security is basing their projected estimates of your benefit upon.

The bottom portion of the second page details how the benefits are estimated. The explanation includes information which may change your benefit amounts (versus the projections), such as changes in earnings levels, receipt of Railroad Retirement benefits, and potential changes to the laws governing benefit amounts. Also included here is information about the WEP and GPO calculations, where they might apply to potentially reduce benefits.

Third Page

The Third Page of the statement lists out the details of your Earnings Record at the top. This section is important to review carefully… you should review the earnings listed for each year against your tax records or W2 statements, to make sure that the information the SSA has is correct. In addition to reviewing for correctness, you should look over your record and note the “zero” earnings years, as well as years that you earned considerably less than what you earned (or are earning) in later years.

As we’ve discussed in the past, your benefits are based upon your 35 highest earning years. If you have had some “zero” years in the past or some very low earnings years, you can expect for your estimated benefit to reflect any increases that the current year’s income represents over your earlier low earnings or zero years. This only becomes significant once you have a full 35 year record in the system.

Another key here is that your projected benefits listed on page 2 are based upon your earnings remaining the same until your projected retirement age(s). If you choose, for example, to retire at age 55 and have no earnings subject to Social Security withholding, your projected benefit will be reduced since those years projected at your current earning level will actually be “zero” years or much lower if you have a lower salaried job during that period. This reduction is in addition to any actuarial reductions that you would experience if you choose to take retirement benefits before FRA.

In addition, if you have gaps showing in your earnings history, you may have had a job that was not covered by Social Security, so you will be interested in knowing how the Windfall Elimination Provision (WEP) affects you, and how the Government Pension Offset (GPO) may affect your family or benefits that you may be eligible from your spouse.

The middle portion of the Third Page shows how much you have paid in to the system over the years – both the Social Security system and Medicare system. This can be an eye-opener… quite often we don’t realize how the money we’ve paid in can stack up!

Lastly on the Third Page, there are details on how to report any inaccuracies that you might find on your statement. It’s much easier to resolve things earlier in the process rather than later – when you’re possibly under the gun about applying for your benefits.

The Back Page

The Back Page of the statement is full of additional information about the Social Security system, benefit calculations, and other fun facts about your benefits. There is also a lot of information about how to find more information about your benefits as well.

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