Go online to check the accuracy of your Social Security account

by Grace

Although most millennials “believe they will receive no Social Security money by the time they retire”, it is still a good idea to understand the basics of how this retirement system works.

Social Security benefits are based on your past earnings

First a summary of the earnings you had throughout your career is calculated. This measure is called the Average Indexed Monthly Earnings (AIME). Your wages for prior years are typically indexed, meaning they are adjusted to reflect inflation over the course of your career. For example, if Peggy earned $20,653 in 1990 this figure would be reflected as $43,531 in her calculation today. The higher your AIME is, the larger your benefit.

Second, a benefit formula is applied to the AIME to determine your Primary Insurance Amount (PIA). In 2014 you receive 90% of the first $816 in AIME, and 32% of AIME between $816 and $4,917, and finally 15% of AIME over $4,917.

Third, an adjustment may be made to the amount you are entitled to depending on the age at which you start benefits, the Social Security earnings test, or other factors.

Fourth, benefits for dependents and survivors are based on the worker’s PIA. For example, a spouse may get a spousal benefit of 50 % of the worker’s PIA, and a widow might get 100% of the worker’s PIA generated benefit.

More basic Social Security information is provided by Ken Tacchino at MarketWatch, including this bit that was news to me.

You can monitor your Social Security account online

From 1999 to 2011 the Social Security Administration mailed Social Security Statements to anyone who was 25 or older. In May of 2012 they stopped these automatic mailings and went online to save money. They will resume mailings every five years (ages 25, 30, 35, etc.) starting in September. However, the online statement that’s created by you in the “my Social Security” section of their website might be your best option to track retirement.

One benefit of the online Social Security Statement is that it can determine whether your earnings are accurately posted each year. Assessing this is crucial because the Social Security benefit is based on the amount you earn each year of your career. If there’s an error in posting your annual earnings, the amount of benefits you receive may be compromised. Regardless of whether your statement is online or not, the statement contains an estimate of the monthly retirement benefit you will receive at age 62, full retirement age, and age 70. Keep an eye on it and factor it into your planning.

Bottom Line: Tracking what Social Security will provide will enable you to better prepare for retirement.

I created a “my Social Security” account, and I would advise everyone to do the same as a way of monitoring the details and accuracy of potential future benefits.

———

Kenn Tacchino, “8 Social Security basics you need to know”, MarketWatch, June 16, 2014.

Advertisements
%d bloggers like this: