When was the last time you took a close look at your Social Security benefit statement?
It was probably around 2011, when the Social Security Administration (SSA) actually stopped snail-mailing its annual benefits statements to save money, opting for emailed copies instead. Congress and consumer advocates complained that workers were disadvantaged because they weren't seeing these updates in their mailboxes.
In September, the agency resumed the practice of mailing paper statements to workers in two categories:
• Those who are not receiving benefits and are within three months of turning 25, 30, 35, 40, 45, 50, 55, and 60. (After age 60, workers will receive a statement every year.)
• Those who still haven't registered for a My Social Security online account.
Even though Social Security will send an estimated 48 million statements each year under this return to paper, it's emphasizing that signing up for your personalized online account is more convenient. Individuals can access and print out their latest statement whenever it's needed.
But at some point, going online may not be a choice. Media reports have recently highlighted the SSA's closing of field offices and reduced services to the public, even though aging Baby Boomers are expected to place unprecedented stress on the Social Security system.
This potential change is all the more reason to understand your Social Security benefits - and to help aging relatives with what will most likely be a mandatory paper-to-online transition in the future. It's an effort that requires three steps:
• Understand your statement.
• Correct possible errors.
• Maximize your Social Security benefits.
Step One: Understand your statement
The standard four-page Social Security benefits statement covers the following:
• Page 1: Introduction.
• Page 2: Your estimated benefits and an explainer:
1. Your Estimated Benefits (Retirement): These numbers, in today's dollars, are your monthly benefits based on your age when you start drawing them. The calculations are based on three critical ages as examples: 62 (the earliest age you can draw retirement benefits), 67 (the full retirement age for anyone born after 1960) and age 70 (the oldest anyone can start drawing benefits, generally at the highest level if you can wait).
2. Your Estimated Benefits (Disability): The amount of your monthly disability benefit if you qualify.
3. Your Estimated Benefits (Family/Survivors): If you have a spouse or minor child projected benefits when you die (If you are divorced, ex-spouses may be able to receive benefits.)
4. Your Estimated Benefits (Medicare): This section confirms your Medicare eligibility and the particular facts to support that conclusion.
• Page 3: Your earnings record summary, which you need to verify. Pull your annual tax returns as far back as you can to confirm this information, and if you work with a tax or financial planning professional, double-check their conclusions if you plan to challenge any errors with the SSA.
• Page 4: Additional definitions and guidelines you will need in order to understand your statement and key contact information. SSA has a more extensive guide here.
Step Two: Correct possible errors
If you or your tax or financial professional spots disparities in your benefit statement, make careful notes, gather your evidence and consult the SSA's contact page to start the correction process remotely or in person at the closest field office. It's important to know that updating and correcting your records may take significant time based on agency staffing and the extent of the problem. So take control and start as early as possible.
Step Three. Maximize your Social Security benefits
Current SSA statistics show that among elderly Social Security beneficiaries, 22 percent of married couples and about 47 percent of unmarried persons rely on Social Security for 90 percent or more of their income. As mentioned, your current statement reflects your benefits in today's dollars, but does not reflect future cost of living (COLA) adjustments. Don't let that give you a false sense of security.
To maximize your Social Security benefits, plan to:
• Save and invest: Even if you've struggled financially in the past, you can still put money away for the future. Need advice? The Financial Planning Association website features a Find a Planner service to match you with a certified financial planner in your area with the particular expertise you need.
• Work longer, work smarter: Your statement shows the big difference in your monthly benefits if you can hold off taking benefits until age 70. Weigh the impact choosing to receive benefits at different ages will have on the amount you receive. Consider what age makes the most sense for your financial situation.
• Consider downsizing: If you live in a high cost-of-living area, consider downsizing your current living situation. Even if you're working, start spending and saving like you're retired already. That means cutting what you spend on housing, transportation, food, clothing and extras - you may find sharper spending habits improve your lifestyle.
Bottom Line: Even if you're years away from retirement, make sure you understand your Social Security benefits and that they are accurate and fit into a broader financial plan for your retirement.
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