Millions of seniors today collect a monthly benefit from Social Security. For many people, that income makes it possible to cover their expenses in the absence of a steady paycheck from work.
If you plan to rely at least somewhat heavily on Social Security to cover your living expenses in retirement, it's important to know what monthly benefit to expect. In a recent Nationwide survey, though, 36% of retirees said they receive less income from Social Security than they anticipated. And that's a problem because now, at least some of the people in that boat might be stuck in an unfavorable financial situation.
It's really important to know how much income to expect out of Social Security for your retirement. Thankfully, there's a very simple way to get that information.
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Check your earnings statements regularly
Each year, the Social Security Administration (SSA) issues workers an earnings statement containing a summary of their wages. That statement also includes an estimate of your monthly benefit in retirement.
Of course, the estimate you'd get at age 30 may not be as accurate as the estimate you'd get at age 50. That's because your monthly Social Security benefit will be calculated based on your wages during your 35 highest years of earnings. The further along you are in your career, the more spot-on your estimate will likely be.
Still, it's a good idea to check your earnings statement every year -- not just to get an estimate of your monthly Social Security benefit, but also to make sure your wages aren't underreported. If it's inaccurate in that department, you'll want to follow up with the SSA to help ensure that your monthly benefit doesn't shrink because of a reporting mistake.
If you're wondering how to get a copy of your earnings statement, it couldn't be easier. Just create an account on the SSA's website and access it there.
Once you turn 60, your earnings statement should also show up in the mail. But you definitely don't want to wait until age 60 to first get an estimate of your monthly Social Security benefit. Rather, it's important to know what that number looks like early on so you can figure out how much of a nest egg you'll need to build to supplement your Social Security income.
Benefit cuts are the wild-card factor
As helpful as it may be to get an estimate of your future Social Security benefit now, you need to account for the possibility of benefit cuts. Social Security is facing a financial shortfall that may force the program to slash benefits by around 20%.
Hopefully, lawmakers will find a way to avoid Social Security cuts. But to be safe, you may want to take your most recent estimate of your monthly benefit and reduce it by 20%. What that'll probably do is light a fire under you to save even more. And that's a good thing.
All told, it's important to know what monthly income to expect from Social Security in retirement so you're not caught off guard. Incidentally, in the aforementioned survey, 9% of retirees said they actually receive more Social Security than they expected, which, for them, is a pleasant surprise. But you're better off going into retirement with an accurate number in your head.
