Even if you're decades away from your retirement age, you can access your Social Security statement online at any time by creating an online account. This document contains valuable information that you can use in your retirement planning, such as how much you can expect to receive and which Social Security programs you qualify for (yes, there are more than just retirement benefits).
With that in mind, here are three of the most important things to look for on your Social Security statement.
When you open up your annual statement from the Social Security Administration, the most important figure to look for is arguably your estimated benefit payments.
The monthly benefit figure the SSA shows you is an estimate of what you would receive each month if you claimed benefits at your full retirement age. For those born after 1960, your full retirement age is age 67. For those born before 1960, it could range from 65 to 66 and 10 months.
What's important to note is that this figure is an estimation (I can't repeat this point enough). Although it will become more accurate as you approach retirement, a number of factors can alter it, including whether your annual earnings increase or decrease, how many years you wind up working (when calculating your benefits, the SSA uses the average income of your 35 highest-earning years), and the cost-of-living adjustment, which closely tracks the Consumer Price Index so that benefits keep up with inflation.
Another figure worth monitoring is your estimated monthly benefit at age 62, the minimum age at which you can claim benefits, and your estimated benefit at age 70, the maximum age at which you can file for benefits. If you wait until age 70, your retirement benefit will be 72% higher than it would be if you began taking benefits at age 62.
Another key piece of information you can find on your Social Security statement is whether you've earned enough credits to qualify for benefits. Technically this isn't a "figure," as the actual number of credits is nowhere to be found on your statement, but it does tell you whether or not you have earned the minimum amount.
If you haven't qualified yet, you can determine how many credits you've earned by reading your annual work record (also included with your Social Security statement). One Social Security credit is awarded for every $1,220 in earnings, and you can earn a maximum of four credits in a calendar year. To qualify for retirement benefits based on your own work record, you'll need to earn 40 credits in your working lifetime.
In other words, by earning more than $4,880 in each of 10 years, you'll qualify for benefits. This isn't much of a problem for those with years of full-time employment, but it can be an issue for those who have only worked sporadically throughout their lives.
The number of credits you earn also determines your eligibility for disability benefits in the event you become disabled and can't work, as well as for survivors' benefits if you die before reaching retirement age. If you're young, you may need fewer than 40 credits to qualify for these types of benefits, and your exact age at the time of disability or death will determine the minimum requirement.
Your Social Security statement can show you whether you've earned enough credits to qualify for various benefits:
Knowing whether or not you've earned enough credits can let you know that your retirement benefits will be available, that you'll have income if anything prevents you from working, and that your loved ones will be taken care of after you're gone.
Many workers understand that throughout their careers, their work is building up an earnings history that Social Security will use to determine how much they receive in retirement. Yet what many people never think about is that if something happens to them -- either in the midst of their careers or after they've retired -- Social Security also pays survivors benefits to qualifying family members.
As you can see above, the Social Security statement gives you just a little detail on this, but it includes a few key figures. Specifically, it says how much your spouse would be entitled to get, both on retiring and if taking care of a qualifying child. The statement also includes a figure saying how much an eligible child would receive in benefits. Finally, it gives the total family maximum benefits that any one family can receive on a person's work history. Of these, the spousal retirement figure is probably the most important, since it applies in the largest number of situations.
Knowing these benefits are there is a vital part of your personal financial planning, and taking them into account can save you on life insurance and other income-replacement products. It's worth having your family look at your Social Security statement just so they know what might be available to them if something unexpected were to happen to you, and the knowledge that Social Security will help take care of them could give them peace of mind in a horrific situation.