Your Social Security benefits are based on the average wages earned during the 35 years of your career when your income was the highest (after each year's wages are adjusted for inflation).
Since your benefits equal a percentage of your average wage, it's crucial this wage is calculated correctly. And that's why everyone should check their Social Security earnings record every single year.
What is your Social Security earnings record?
Each year, the Social Security Administration receives a report of how much you earned. The SSA compiles all of this data into your earnings record. The record displays:
- The year in which you worked
- The amount of your earnings that you paid Social Security tax on
- The amount of your earnings that you paid Medicare tax on
The amount you paid Social Security tax on should usually match up with the total amount of money that you earned over the course of the year. But that's not always the case if you made a lot of money. There's a "wage base" limit, and income earned above it each year isn't taxed for Social Security purposes and doesn't go on your earnings record. In 2022, the wage base limit is $147,000, so if you earn more, only $147,000 of it will show up on your earnings record.
The taxed earnings for Medicare, on the other hand, will show the whole amount you earned over the year because you pay Medicare taxes on all the money you make with no wage base limit.
How can you check your Social Security earnings record ?
Checking the record of your earnings on file with the Social Security Administration is actually really easy.
You can do it online by creating an account at mySocialSecurity.gov. Creating an account is free, although you must be at least 18; have a valid Social Security number and U.S. mailing address; and be able to provide an email address. You'll also need to answer some identity verification questions so you can prove you really are who you claim to be.
If you already have an account, you can sign in with the user name and password you created when you opened it. A security code will be sent to the email address you have on file, which you'll have to enter. And you will need to agree to the terms of service, including not sharing your account access information with others.
Once you have signed in, on the website's main page, you will see the option to "Review your full earnings record now." If you click it, you'll see a list detailing each year you worked and the amount you earned.
Why is it important to check it every year?
Checking your Social Security earnings record annually is crucial. That's because if your wages are underreported, you won't get credit for the full amount you earned and paid taxes on. This error will lower the career-average wages that the Social Security Administration uses when calculating retirement benefits.
If you wait too long to check your account, you may not remember what you earned, so you won't be able to spot mistakes as easily. And if you do find an error, you may no longer have the documentation needed to prove it and correct the record.
You can't afford to lose credit for income you paid Social Security taxes on and to end up with a smaller benefit because of it. It takes mere minutes to sign into your account each year and check your earnings history, so put this task on your calendar as an annual must-do.