How to Read Your Social Security Statement -- and What to Fix Before You Claim

Just about all of us can look forward to receiving Social Security benefits in the future. And for many of us, they will be a critical lifeline. As the Social Security Administration (SSA) has noted, "Social Security benefits represent about 31% of the income of people over age 65." And even more striking: "Among Social Security beneficiaries age 65 and older, 39% of men and 44% of women receive 50% or more of their income from Social Security."

Thus, it's important to get familiar with our Social Security Statements -- even well before we retire. Read on to see why.

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Meet your Social Security Statement

There's a Social Security Statement for each of us workers, and the SSA updates it annually. In the past, it would arrive in the mail, but now it's available online and can be mailed to you upon request. (Each of us should set up a my Social Security account at the SSA website, in order to access our statements. Those 60 and older may get a copy of their statement in the mail if they don't have a my Social Security account, but to enjoy a lot of functionality and even potentially to prevent a scammer from co-opting your account, it's best to set up an account.)

The statement was redesigned in recent years and now features a bar graph offering estimates of your retirement benefit estimates at nine different claiming ages -- because we can claim our Social Security benefits anywhere from age 62 to age 70. (The earlier you claim them, the smaller they'll be, but you'll receive more of them. Studies have shown that for most, but not all, of us, waiting until age 70 will yield the most total benefits.) The statement's estimates of benefits can be very helpful when planning for retirement.

Importantly, the statement also includes a record of your earnings history and directions on how to have errors corrected.

What to fix before you claim your benefits

It's critical to fix any errors you spot, because that will make your benefit calculations more accurate. If the SSA is underreporting your income for one or more years, that will likely result in your eventually receiving lower benefits than you're entitled to. The paper statement is likely to aggregate earnings from many years ago and only list earnings by year for the last 20 years or so. Via your my Social Security account, though, you'll be able to see earnings for every year.

Note that when calculating your benefits, the SSA formula incorporates your earnings from the 35 years in which you earned the most (adjusted for inflation) -- so you want at least 35 accurate years on your record.

So check out your Social Security Statement -- you may find it quite interesting.

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