Imagine this: You have a day coming up with no commitments on the calendar -- an entire day to do anything you want. What are the odds you'd use that time to log into your Social Security account to review your earnings record?
If your answer to that question is "zero," there's no reason to feel bad. It's hard to imagine that many people make it a practice to check their earnings record.
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Why does it matter?
The formula that determines your Social Security retirement and disability benefits is based on how much you've earned through the years. And how much you've earned through the years is based on numbers provided to the Social Security Administration (SSA) by your employer(s). If you look at your my Social Security page, you'll find those figures listed in chronological order.
As earnestly as employers try to provide the SSA with the correct numbers, the system is not infallible. Humans make mistakes, and it's easy to type in $32,000 instead of $52,000. While it may not seem like a big deal, every dollar you earn helps maximize the amount you're eligible for if you become disabled or when you retire. It may be just one of the ways you can maximize Social Security payments, but it's important nonetheless.
The SSA suggests checking your earnings record each August to ensure the amount reported for the previous year is correct. Here's a rundown of the reasons it makes to sense to double-check your earnings record.
You'll ensure your highest-earning years are captured
Benefits are based on your highest 35 years of earnings. A missing or incorrect entry may result in lower benefits.
You can avoid future hassles
Let's say you're applying for disability or retirement benefits, and your personal records show that you earned more than the amount that's been reported to the SSA. The discrepancy can complicate the process and cause unnecessary delays.
You may stay out of trouble with the IRS
If there's been a mistake at some point in the process, it's possible that the SSA will have a different income listed than you report to the IRS at tax time. The goal is to ensure both figures are the same, so there's never a question about whether you've been honest.
You'll have a better sense of the right time to retire
Planning for retirement involves all kinds of calculations, from how much you should plan to pay in taxes to whether you've saved enough for out-of-pocket healthcare expenses. In other words, retirement planning involves many moving parts.
When you know your earnings record is correct, you also know that the amount of Social Security you're owed is also correct, and that information helps you determine when you can afford to retire.
You'll have more peace of mind
If you've been working for 40 years, it may be tough to know whether your reported income for 1985 is correct. However, by checking your record once a year, you can stay on top of it.
Support is available if you need assistance. You can call the IRS at 800-772-1213 and ask a representative to confirm that the amount added to your record last year was correct.
