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Your Social Security Statement Explained


Key Points

» Social Security — Just One Piece of the Retirement Pie
» About Your Current Year Earnings …
» Assess Your Retirement Readiness
» Can You Count on Your Benefits?
» Knowledge Is Power
» Points to remember

On October 1, 1999, the Social Security Administration (SSA) began
mailing new annual Social Security Statements of estimated benefits
to over 125 million workers. More than 300,000 statements are
mailed each day. If you are age 25 or older and are not currently
receiving Social Security benefits, you can expect to receive your
statement near your birthday.

The SSA also has an online, interactive calculator on its Internet
site. You can use this calculator to estimate your Social Security
benefits. This calculator is available at the Social Security Web
site at

Social Security — Just One Piece of the Retirement Pie


Many people may not realize that Social Security benefits will
likely provide only a portion of the income needed each year in
retirement. The rest must come from other sources, such as company
pension plans, personal savings, and perhaps part-time earnings.
Your individual Social Security Statement of estimated benefits
could help you assess whether you are adequately preparing for

The information in your statement includes estimates of your future
retirement, disability, and survivor benefits. The statement offers
you an opportunity to determine whether your earnings are
accurately posted on your Social Security records. Because Social
Security benefits are based on an individual’s career record,
this is an important feature.

When you receive your statement, you’ll want to check to see
that your record of earnings is correct. For example, if you have
begun using a different name on your employment records and have
not notified the SSA of the name change, some of your earnings may
not have been posted to your Social Security account. If there are
errors in your earnings record, follow the instructions included in
the statement to notify the SSA of discrepancies.

About Your Current Year Earnings
You should know that your most recent calendar year earnings
may not be accurately reflected on your statement. For instance, if
you receive a statement in 2010, your 2009 earnings may not yet be
posted to your account. The SSA processes information throughout
the year for the previous year’s earnings based on information
received from employers and the IRS. If you worked for more than
one employer during 2009, all of your earnings for that year may
not be posted to your account at the same time.


Assess Your Retirement Readiness


Your Social Security Statement will provide an estimate of your
retirement benefits if you have already earned at least 40
“credits” during your working life. Each year, the SSA calculates
the number of credits that you earned that year based on your
reported income, up to a maximum of four credits.

Your statement also includes the following: a yearly breakdown of
your recorded earnings to date; the total amount of Social Security
taxes paid by you and your employers over your career; and an
estimate of the monthly benefit you could receive if you become

You can use your estimated monthly retirement benefit (if provided)
to get a rough idea of how much of your monthly retirement income
your personal retirement plans and savings will need to provide.
There are many retirement savings worksheets available that can
help you calculate your estimated retirement income needs. The
nonprofit American Savings Education Council offers a free online
retirement savings calculator on the Internet at As a
rule of thumb, financial experts typically assume that you will
need about 70% to 80% of your last working year’s salary each
year in retirement.

Keep in mind that your estimated monthly benefit is based on your
current wages. If your income increases in future years, your
estimated Social Security benefits may also increase. In addition,
Social Security and Supplemental Security Income (SSI) benefits
automatically increase annually based on the rise in the Consumer
Price Index (CPI) for Urban Wage Earners and Clerical Workers, from
the third quarter of one year to the third quarter of the next

Can You Count on Your Benefits?


According to the SSA, your benefits will be there for you when you
retire. However, the SSA acknowledges that some changes to the
present system may be required. Most people today are living
longer, healthier lives, but when Social Security was created the
average life span was less than 65 years. Over the next decade, 76
million baby boomers will start retiring, and in about 30 years
there will be nearly twice as many older Americans as there are
today. Currently, Social Security takes in more in taxes each year
than it pays out in benefits. But in ten years, according to
estimates by the SSA, the amount of benefits paid out will begin to
exceed the amount collected in taxes. Based on SSA projections, by
2037 the Social Security trust fund will be exhausted and payroll
taxes collected will be enough to pay only about 74% of benefits
owed. Recognition of these issues is growing, and legislators are
now looking at funding and investment options to resolve

Your Social Security benefits are an important piece of the
retirement income pie. You should not rely solely on Social
Security for your retirement income, however. Your
employer-sponsored retirement savings plans, company pensions, and
personal savings will likely provide the major portion of your
income in retirement.

Knowledge Is Power
A Gallup Organization survey found that Social Security
Statements have a positive effect on increasing the American
worker’s understanding of how the Social Security system
works. According to the survey, those who receive the statements
are much more likely to understand that:

  • an individual’s Social Security benefits are based on his
    or her earnings;
  • disabled workers can be eligible for Social Security
  • Social Security provides benefits to survivors of deceased
    workers; and
  • Social Security was not developed to fund an individual’s
    entire retirement, but rather to be just a part of total retirement


Points to Remember


  1. If you are not already receiving Social Security benefits, you
    should receive your Social Security Statement within three months
    of your next birthday.
  2. If you have accumulated 40 credits based on your work history,
    your statement will include an estimate of your monthly retirement
    benefit based on your current annual earnings.
  3. Check your statement carefully to ensure that your earning
    history is accurately reflected, and contact the SSA to correct
    errors. Note that your previous year’s earnings, however, may not
    be up-to-date, due to delays in receiving and processing
    information at the SSA. No correction is required for missing
    information for the previous year unless you have reason to believe
    that information may not have been properly provided to the SSA by
    your employer.
  4. Your estimated benefit is only an estimate. As your income
    increases, so may your retirement benefits. Your benefit will also
    increase automatically over time due to inflation adjustments.
  5. Your personal savings, pensions, and retirement plans will
    likely be your primary source of income in your retirement.


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