By Joel Dresang

Each year, several weeks before my birthday, Social Security emails me a reminder to review my individualized online statement. It gives me a chance to check for possible errors and to consider the progress I’m making toward funding my retirement.

Catching mistakes is important because my eventual Social Security benefits are based on the earnings that show up on my statement.

It’s easy to give such financial statements a cursory glance or even to ignore the email. But I turn 62 this year, which my cohort could tell you makes me eligible to start receiving benefits. In fact, I have friends planning to retire this year, which motivated me to give my statement more than a casual once-over. Among my impressions:

1. I qualify for benefits. Workers become eligible for monthly Social Security payments by earning points based on a nominal level of annual earnings ($1,410 in 2020) over at least 10 years. My statement shows that I’ve been paying into Social Security since the summer when I was 16 and got a kitchen job at a Kentucky Fried Chicken.

2. Forced savings accumulates. According to my statement, I have paid nearly $144,000 into Social Security. Sure, that amount probably would be bigger if I had been able to invest those payroll taxes instead, but the fact is Social Security was setting aside my money before I had the gumption to do it myself. My estimated retirement benefit at age 62 would be $2,005 a month, or annually 16.7% of the taxes I put into the program so far. Including the contributions from my employers, the distribution amounts to 8.3% per year for the rest of my life.

3. Estimates are educated guesses—and moving targets. The benefit amounts are based on my past earnings and assumptions of how much I’ll continue to earn. They are not adjusted for inflation or taxes. (My Social Security Statement from 30 years ago estimated that at 65, my monthly retirement benefit would be $310 a month. That would be $658, adjusted for inflation.) Also, as the statement notes in boldface, “The law governing benefit amounts may change.” The good news is that estimates get more accurate the closer you get to retirement, which means my estimate for age 62 should be close.

4. It pays to delay—for my loved ones. It wasn’t news to me, but the statement personalized the message that waiting to claim my benefits will escalate how much I receive. At 66 and 8 months (my full retirement age), my monthly benefit is 44% fatter than at 62. If I wait until I’m 70, the maximum amount rises another 29%. What I hadn’t considered before, though, is that if I claim an earlier benefit at a lower amount, that would lock in my wife’s survivor benefit at the lower level.

To create a Social Security online account or sign in, go to: https://www.ssa.gov/myaccount/

5. It pays to work longer. Not only does it allow me to delay tapping my retirement investments and my Social Security benefits, working longer lets me add to both. If I both claim Social Security and work, my benefits might be limited by my earnings but only until I reach my full retirement age. And with new rules on retirement savings, I should be able to keep contributing my earnings to my 401(k) without required withdrawals until I’m 72.

6. Plan for a heads-up. To claim my retirement benefits, I need to complete an application and get it to Social Security three months before the month I want the benefits to start. That would allow the agency to use my latest earnings data to compute my monthly benefits.

7. Balance matters. Two of my brothers took Social Security early, foregoing the higher monthly payments they could have received by waiting. They both died in their early 70s, though, so they happened to make use of benefits while they could. When to claim benefits is just one of the time-vs.-money choices I’ll face when considering retirement. “Everyone needs to try to find the right balance, based on his or her own circumstances,” Social Security offers in one of its guides. It’s not one-size-fits-all.

Other Money Talk articles from Joel Dresang

Social Security will be only one piece of the puzzle, one portion of the money we’ll have for living expenses after I eventually retire. The yearly reminder to review my Social Security Statement serves as a regular nudge to keep myself informed and thinking ahead and conferring with others—my wife, family, friends and professional advisors—to help me find the right balance.

Joel Dresang is vice president-communications at Landaas & Company.

Social Security Retirement Estimator

Learn more
Social Security and my future, by Joel Dresang
Working longer to fatten Social Security, A Money Talk Video with Lisa Lewitzke
Planning retirement via Social Security, A Money Talk Video with Lisa Lewitzke
Social Security: Know your options, A Money Talk Video with Lisa Lewitzke
When Should I …check my Social Security Statement?
A Social Security guide on when to start receiving retirement benefits
Benefits calculators, from the Social Security Administration
Frequently Asked Questions, from the Social Security Administration
“When to Take Social Security Benefits: Questions to Consider,” from the National Academy of Social Insurance
Get online with Social Security, by Joel Dresang
Retirement Insurance at 75, by Joel Dresang

(initially posted February 27, 2020)

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