Understanding “Your Social Security Statement”

For years you may have received your annual Social Security Statement and paid little attention. But as you near retirement, the statement becomes more important because it provides a concise, easy-to-read record of the earnings on which you’ve paid Social Security taxes. It also provides an estimate of the benefits you can expect to receive after a qualifying event.

The Social Security Administration sends out these earnings statements to individuals several weeks before their birthday. Alternatively, you may obtain a copy of this Statement by contacting the Social Security Administration (Official Online Request Form ).

To explain the information that your Statement conveys, let’s look at a typical example. A month or two before Joe’s 59th birthday he receives a “Your Social Security Statement” from the Social Security Administration, which says:

  • You have earned enough credits to qualify for benefits. At your current earnings rate, if you stop working and start receiving benefits…
    • At age 62, your payment would be about $1,633 a month.
  • If you continue working until…
    • your full retirement age (66 years), your payment would be about $2,165 a month.
    • age 70, your payment would be about $2,858 a month.

The statement presents the levels of projected monthly benefits in today’s dollars if Joe were to begin benefits at age 62, at his Full Retirement Age (66 in this example), or at age 70. However, it is important to understand that these projections assume that, should he continue working beyond age 62, he will continue to earn his current level of inflation-adjusted income (or at least the maximum annual income subject to Social Security taxes) until benefits begin.

If Joe retires at age 62 and begins receiving benefits at age 62 – which are two separate decisions – then he can expect an inflation-adjusted monthly income of $1,633 for the rest of his life. If he continues to work until his Full Retirement Age (FRA) of 66 and then begins receiving payments, he would get $2,165 a month. This payment amount at FRA is called the Primary Insurance Amount, and its calculation is discussed in a separate article. If Joe works until 70 and then begins receiving payments, the projected monthly income is $2,858.

In short, when you begin your benefits can make a material difference in your monthly and lifetime benefit amounts. Our Social Security Snapshot Report can help you make sense of your options and guide you in making the most of your Social Security benefits.

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