Understanding your Social Security retirement benefits

Social Security is a vital source of income for most retirees. However, many Americans are unsure about how much they will receive in benefits. According to a survey by the National Institute on Retirement Security, only 11% of non-retired individuals know exactly how much they will get, while 24% are “not very sure” and 22% have no idea. In 2024, nearly 68 million Americans will receive Social Security benefits, totaling around $1.5 trillion in payments. On average, retired workers receive $1,918 per month. Experts stress the importance of knowing your potential Social Security income well before retirement. The Social Security Administration (SSA) offers detailed statements to help workers of all ages estimate their benefits. Anyone aged 18 and above can create a “My Social Security” account online to access these statements. Workers aged 60 and older without online accounts will receive paper statements in the mail, although anyone can request paper statements if they prefer. “Workers can go to the Social Security Administration website and log into their own account to receive an estimate of their future benefit amounts,” said Tyler Bond, research director at NIRS. “Most workers seem not to have done that and don’t seem to have a good sense of what they will get personally from Social Security.” For those aged 62 to 70, checking your Social Security statement is essential to understand how annual cost-of-living adjustments affect your monthly benefit checks. It’s also valuable for younger workers to gauge what kind of living standard Social Security would provide if they continue working and earning wages that keep up with inflation. It’s crucial to remember that these statements are a snapshot in time and do not project wage increases or future cost-of-living adjustments. The estimated benefit may fluctuate if your earnings history is less than 35 years, as even one additional year of higher wages can have a significant impact.

Estimating future Social Security income

“The closer someone is to age 62, the more accurate it is,” said Jim Blair, vice president of Premier Social Security Consulting and a former Social Security administrator. Checking your Social Security benefits statements is also important to ensure there are no errors in your earnings history. Verifying your wage history annually can help correct any mistakes early on. “If you see earnings are missing or they’re not posted correctly, you can get that fixed,” Blair said. “And the earlier you catch it, the easier it is to fix it.” To correct your earnings record, bring your W-2 form (or Schedule SE if self-employed) to your local Social Security Administration office. Other forms of proof include tax returns, wage stubs, pay slips, and personal wage records. The SSA is implementing a more secure system for online account holders, so be aware of fraud. Emails may try to redirect individuals to false links to steal personal information. Always ensure the link is a secure “.gov” website before entering any information. Despite uncertainties surrounding Social Security’s future, with trust funds running low, many experts believe Congress will likely implement changes to protect the program. Younger workers should still expect some return on what they pay into the program. It’s totally reasonable to expect a benefit cut for younger people,” Elsasser said. “But to plan for it not to be there at all is a poor assumption.” In conclusion, knowing your Social Security benefits is crucial for financial planning. Regularly checking your statements can help you catch any errors and give you a better understanding of your future income. While there may be uncertainties regarding future benefits, staying informed and prepared is the best strategy.