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Social Security Benefits: In Context

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A key component of retirement planning is estimating what we will receive from Social Security when we retire. But thinking about Social Security is not just for those 60 and over, so let's put Social Security into context.

Social Security benefits are calculated based on your highest paid 35 years of work. If you have less than 35 years on record, you have zero earnings for those years. When you have more than 35 years of work, your lowest earning years drop off. In 2014 earnings above $117,000 were disregarded for purposes of this calculation. To put this in context, the highest retirement benefit payable at full retirement age in 2014 was $2,642 per month.

Social Security also provides survivor benefits for a spouse and minor children, disability benefits for the taxpayer, and a small death benefit. If you would like an estimate of those benefits, take a look at your Social Security Benefit Statement. This statement is a mere projection based on your historical information. The impact of wage changes, working less than 35 years, and timing of retirement can impact these estimates significantly.

Prior to 2011, everyone received their benefit statements in the mail bi-annually. In 2011 Congress attempted to reduce mailing cost ($70 million annually) by only issuing electronic versions via the SSA website. As of 2014 there is a hybrid approach as follows:

  • Prior to your 25th birthday you will receive your first statement by mail, and you will receive another every 5th year thereafter
  • Upon attaining age 60, statements will be sent every year
  • However, IF you sign up to view statements online, you won't receive ANY paper statements
  • You can register for online statements at www.socialsecurity.gov by creating a User Name and Password (Be Warned that Password may require updating every 6 Months)


Please note that according to Social Security estimates, without prior changes, beginning in 2033 the Social Security Administration will only be able to fund 77% of the scheduled benefits reflected on these Benefit Statements.

In addition to checking your benefits, there are other reasons to check your statements every year. If your income or your taxes are not included in your report, it could be a sign that your employer is not reporting your income, or worse, not remitting your withheld FICA taxes. If the amount reported by Social Security is greater than your actual wages, it may be a sign that your identity has been stolen and an someone is using your Social Security number to obtain employment. This will also become a problem when the IRS contacts your for under reporting your "income."

As you can see, there are many factors that enter into obtaining a reliable estimate of benefits. Similarly, there are also strategies to maximize those benefits as you near retirement. We will address those strategies in a future installment.

If you have questions regarding Social Security benefits, or other similar issues, please contact your HWE relationship attorney or visit us at http://www.hwelaw.com.

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