Social Security: A Statement of the (Not So) Obvious
It's a benefit you've been purchasing your entire working life, but like legions of other Americans, you may not be aware of exactly what you've bought and, more importantly, the options and strategies you have for redeeming it. To be sure, there is a lot to know about Social Security - and, unfortunately, there is no user's manual. But there is a statement.
It All Starts With the Statement
Your road to a better understanding of Social Security begins with one four-page report, your Social Security Statement.
The Social Security Administration (SSA) prepares and maintains statements for every person over the age of 25 who has paid into the system. You may or may not be aware of this, because the SSA has changed (more than once) its method of distributing the statement in recent years.
Starting in October of 1999, the statement was mailed to you every year. No need to request it; it just came. Today, after a series of changes, fits and starts in 2011 and 2012, the only way to access your statement is to visit www.ssa.gov and sign up for a "My Social Security" account.
Why should I go to the trouble, you ask? Well, the statement contains some pretty important stuff:
1. Your Earnings History. Found on page 3 of the statement, this is a record of every dollar you've paid into the Social Security system. You will want to check this for accuracy because it will determine the approximate amount of your monthly SS check once you start collecting benefits. Your earnings are listed year by year, and the SSA will use the best 35 of those to determine your benefit. If you find an error, contact SSA and get it fixed!
2. Your Estimated Benefits. Found on page 2 of the statement, this is an estimate of how much money you may get at age 62 (currently the earliest eligibility age), at full retirement age and at age 70. Importantly, this is only an estimate and is subject to change. It assumes you will work to your collection age and continue earning whatever you did last year. Generally speaking, the closer you are to retirement, the more accurate your estimate may be.
3. Program Summary. A letter summarizing the health of the program is included on page 1 of your statement. This year's letter estimates that the system can meet all future liabilities through 2032. If nothing changes between now and then, benefits will need to be cut by 23% starting in 2033.
Beneficiary, Meet Statement …
I encourage you to introduce yourself to your Social Security Statement. It's an important first step to ensuring the benefit you've been working toward for years is maximized throughout your non-working years.
Of course, this is only the tip of the iceberg. We have a lot more to talk about, and I look forward to doing exactly that via future posts. We'll cover everything from deciding when to collect to the intricacies of spousal benefits to special considerations related to divorce. I'd love to make this a dialogue, and encourage you to use the comments section below to send me your questions. I'll provide answers in future posts.
Until then, here's what you can do right now:
Three Easy Steps to Take Now:
1. Visit the Social Security Administration's website to download your Social Security Statement.
2. Meet with your financial professional to review how a Social Security strategy fits into your broader retirement plan.
3. Visit BlackRock's online Retirement Resource Center for more information on Social Security and other topics related to retirement planning and investing.
Rob Kron, Managing Director, is the head of Investment and Retirement Education for BlackRock's U.S. Wealth Advisory group. He is the newest contributor to The Blog , providing practical information on topics that are important to every saver and investor of every age.
Sources: BlackRock; Social Security Administration; Internal Revenue Service. Please see the Social Security Administration's website at www.ssa.gov for more information, restrictions and limitations about Social Security benefits.