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1 Smart Social Security Move for Americans of All Ages

By Matthew Frankel, CFP® - Updated May 22, 2018 at 7:05AM

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Here’s one thing you should be doing every year, even if you’re young.

Every year, the Social Security Administration issues a statement to each American worker. These used to come in the mail, but these days they are generally accessed online at www.ssa.gov by creating a "my Social Security" account.

Unfortunately, many American workers, especially those who are still years away from retirement, don't check their Social Security statements regularly -- or at all. This is a mistake, as your Social Security statement not only contains some valuable financial planning information, but catching errors on your statement can mean a big boost to your retirement income.

Social Security card inserted in a pile of money.

Image source: Getty Images.

Lots of valuable information

The first reason to check your Social Security statement is for financial planning purposes. Your annual statement contains several valuable pieces of information, such as:

  • Your estimated retirement benefits: Keep in mind that these aren't 100% accurate, especially if you're relatively young, as the SSA assumes your salary will stay about the same (inflation-adjusted) for the rest of your career. That said, this can be valuable information for retirement planning, as you'll know approximately how much retirement income to expect from Social Security. Your statement will tell you how much you can expect at full retirement age, as well as how it would affect you to claim benefits at age 62 or 70 instead.
  • Disability benefit eligibility: Your Social Security statement tells you whether you've earned enough Social Security credits to qualify for disability benefits, as well as how much you'd get if you were to become disabled.
  • Survivors benefits: This is one of the lesser-known parts of Social Security. If a worker dies prematurely, his or her dependents may be entitled to a monthly survivor benefit on their work record. Your statement will tell you if your survivors would qualify for benefits and how much they could receive.
  • Medicare: Your Social Security statement tells you if you've earned enough credits to qualify for Medicare when you turn 65.

Make sure the SSA got your earnings right

In addition to the valuable information contained in your Social Security statement, another important reason for checking it regularly is to make sure your earnings record is accurate.

If you aren't aware how Social Security benefits are determined, the short version is that the SSA looks at your Social Security-taxed earnings from your entire career and indexes each year's total for inflation. The 35-highest years are then averaged and applied to a formula to determine your benefit.

Here's the point: Your Social Security benefit relies on your earnings record on file with the SSA, but the latter gets things wrong more often than you might think. In one recent tax year, the SSA said that about $71 billion in wages couldn't be matched to any earnings records -- and only half of these were eventually fixed. This leaves roughly $35 billion in Social Security wages that aren't being used to calculate their owner's eventual retirement benefit, and this is just from one year.

For example, maybe your new employer got your Social Security number wrong on your paperwork, so the SSA hasn't given you credit for your earnings.  Or perhaps you have self-employment income that wasn't properly recorded.

The bottom line is that in addition to using your Social Security statement for retirement planning purposes, it's important to verify your earnings record each year to make sure that when you do retire, you get every cent of benefits you're entitled to.

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