What You Should Know about Your Social Security Statement - dummies

What You Should Know about Your Social Security Statement

By Jonathan Peterson

Copyright © 2015 AARP

Think of your Social Security statement as your personal reminder from the SSA. The four‐page statement lays out specific details about the benefits you’ve earned for yourself and family members. It also contains lifetime summaries of your annual earnings, as well as how much you’ve contributed in payroll taxes to Social Security and Medicare in your working career.

How to access it

Until recently, these reminders came in the mail to more than 150 million workers age 25 and up each year, about three months before the person’s birthday. The SSA now mails them out more selectively. Currently, the policy is to mail statements at five‐year intervals, from age 25 to age 60 (and annually after that), to workers who have not registered to view their statements online.

If you get a copy of your personal Social Security statement in the mail, save it. The statement contains important estimates of your Social Security benefits, including retirement, disability, and survivor benefits.

How to understand it

Your Social Security statement includes several key sections:

  • An estimate of monthly retirement, disability, and survivor benefits that may go to your family members (page 2)

  • Your year‐by‐year earnings record in the SSA’s files, which it has used to determine your benefits (page 3)

  • Basic information about how benefits are estimated (page 2) and descriptions of the main types of benefits (page 4)

The statement also offers guidance on keeping your earnings record accurate with the SSA (page 3); shows your lifetime payroll tax contributions for Social Security and Medicare (page 3); and explains the Windfall Elimination provision and Government Pension Offset provision, two policies that may reduce benefits for individuals who had jobs that were not covered by Social Security (page 2).

You can download a sample of the Social Security statement for an imaginary person named Wanda Worker (catchy, huh?).

Estimate of monthly benefits

If you look at the sample statement (or your own statement), you can see on page 2 that the age when you claim benefits can make a substantial difference in the monthly amount.

The 2014 sample statement shows that if Wanda Worker maintains her current rate of earnings, she can expect retirement benefits of $1,159 per month if claimed at 62, $1,680 per month if she keeps working and claims at her full retirement age of 67 (a 45 percent boost), and $2,094 per month if she keeps working and claims at age 70 (an additional boost of about 25 percent for delayed retirement).

Although the personal Social Security statement uses your actual earnings to compute disability and survivor benefits already earned, it makes assumptions about your future earnings to estimate retirement benefits. The more years until your retirement, the more uncertain the forecast.

The statement also shows how you earn benefits that many people don’t even think about. In the case of Wanda Worker, she’s earned disability benefits of $1,527 per month if she becomes disabled right away. If she were to die, she’s earned survivor benefits of about $1,176 per month for a child and as much as $1,569 per month for a spouse (at the spouse’s full retirement age).

Earnings record

Page 3 of the statement displays your earnings record. It documents the amount of earnings that were taxed for Social Security and Medicare year by year — in the case of Wanda Worker, from 1990 through 2012. Wanda Worker is credited with 23 years of earnings. Because retirement benefits are based on the 35 years of highest indexed earnings, Social Security would add 12 zeros in computing Wanda’s benefits. By working longer, Wanda will increase her benefits.

Your earnings record is important because it provides the basis for your Social Security benefits. You should review the numbers with care and call the SSA if you spot any errors.

You don’t need a Social Security statement to review the earnings history the SSA has on file for you. You can get the information by doing one of the following:

  • Going to your local SSA field office: An SSA field office will supply you with a summary if you ask for one.

  • Filling out a form and mailing it to the SSA: For more detailed information, including employers’ names and addresses, go to ssa.gov, click on “forms,” and plug in the number 7050 to get the form. You will be charged a fee for this information.