Each year, you should receive an earnings statement from the Social Security Administration. It's tempting to glance at the statement and stick it in a drawer, especially if your retirement is years away. But resist the urge. Instead, take a few minutes to review the information in your statement. Look for four key items.
Your lifetime earnings record.
A table in the statement shows your social security earnings for each year. You should check that the numbers for the last two or three years match the amounts shown in your records. If the numbers don't agree, it's important to contact the Social Security Administration and correct the error. If you don't, it could affect your future benefits.
Note that the total for the most recent year may not include all your earnings for that year. If this is the case, be sure to check the number again when you receive your next year's statement.
Your projected retirement benefit.
The statement shows the estimated amount you'll receive at full retirement age, assuming you continue working. This is a key number for your retirement planning.
Your full retirement age.
This is the age when you'll be eligible for full social security benefits. Traditionally, full retirement age was 65. But if you were born in 1938 or later, you'll have to work a little longer to draw full benefits - perhaps up to age 67. The statement will show the full retirement age for your birth year.
Your reduced benefit if you retire early.
This shows the reduced benefit you'll receive if you retire at age 62. This number can help you decide the trade-offs if you're thinking of retiring early.
For most of us, social security benefits are likely to be an important part of retirement income. It's important to review your statement carefully and correct any mistakes. The statement also gives you key information that you need to build your retirement plan.
Contact us if you have questions about how retirement benefits are taxed or if we can help with your retirement planning.
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