DON'T DESPAIR OVER Social Security; don't get bogged down in anxiety about retirement benefits, earnings, savings, or other shortfalls. Use your energy to keep moving ahead. You will get something from Social Security, but it's not clear what it will be. Social Security is unlikely to disappear. But the crystal ball is cloudy on how benefits might change.
Smart financial planning requires that you stay on course and read all the road signs. Many people believed they were on target for a comfortable retirement until the global markets collapsed in the fall of 2008 and investors lost 30 percent, 40 percent, 50 percent, and more of their savings. Some investors who gave their money to Bernard Madoff and his Ponzi scheme lost everything. But anxiety will not help. Try to stay on course and be flexible.
Even if Social Security benefits do shrink before you retire—or especially if they shrink—you want to be certain that you get what you've earned from the system. To do that, check on your recorded earnings and expected benefits. The Social Security Administration mails annual statements to workers and former workers age twenty-five and over.
Social Security benefits are based on your lifetime earnings. If your earnings get reported inaccurately to Social Security or if the Social Security Administration records them inaccurately, it could affect your benefits. The Social Security Administration is not required to correct any error in an earnings statement that is more than three years old. When I checked my own benefits the first time, I discovered I hadn't received credit for three years of earnings because I don't use my husband's surname and our income tax records had become jumbled at the Social Security Administration. Those years, which happened to be my highest earning years, were reported nowhere.
The burden is on you to make certain your records are accurate and up to date. When you get married or divorced or report your earnings on a joint return when you did not do so before, it's time to check your earnings record.
That's pretty easy to do. Call Social Security at 800-772-1213 and follow the automated instructions to request a copy of your Social Security earnings and benefits estimates. You may also go to www.ssa.gov to check earnings and benefits and to find answers to other questions about Social Security such as when is the best time to apply for benefits. You might be suspicious that you'll get an answer that favors the system rather than your pocketbook. But that's not necessarily true. Benefit start dates as well as tax implications and the effect on future benefits have become a complex area. Be sure you know all the rules.
In addition to the annual statements, Social Security will respond to any worker who requests a statement at any time. The statement shows your estimated benefits if you stop working at age sixty-two, at your full retirement age, which will be at sixty-six or sixty-seven, and at age seventy, when you would earn additional benefits for working longer.
It also shows estimated disability benefits for you and your spouse and children. But the statement warns that the law governing benefit amounts may well change because by 2041, payroll taxes collected will not be enough to pay scheduled benefits.
The statements issued at the end of 2008 noted that "the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today's younger workers are ready for retirement."
Take the time to read the statement and check your earnings record to make certain it reflects your work history. If you are nearing retirement age, take a look at the web site as well where you will find help in calculating benefits. If there is a mistake in your record, request a correction immediately.