Now that the Social Security Administration has decided to begin mailing out paper benefit statements to workers again, we might start looking forward to getting snail mail for once. Or at least we should.
Beginning in September, workers older than 25 will begin receiving their benefits statements once every five years. Benefit statements provide a detailed snapshot of how much you can expect to earn in monthly Social Security benefits when you hit retirement age, plus your estimated disability and Medicare benefits.
We know. It all sounds a little backward. When 80% of Americans have access to the Internet at home, why waste government resources to send us information we could easily find online? After all, the Social Security Administration (SSA) went digital in 2012 to save money.
The reality is that only a fraction (6%) of workers are currently signed up to get their statement online, according to the SSA. If you’re young, healthy and working today, chances are you aren’t too concerned about what life will be like 30, 40, or 50 years down the road.
Paper statements can give workers just the wake-up call they need to kickstart their retirement savings plan, says Patrick Doland, a fee-only certified financial planner with Reason Financial Advisors, Inc. in Northbrook, Ill.
“Without [that statement], there’s often no triggering event that causes people to think about Social Security income,” Doland says. “Life goes on and there’s nothing that makes people ask whether they’re on track and if they’ll be able to enjoy the kind of retirement they want.
So, if you find a letter from the SSA in your mailbox come September, don’t just toss it. Check out this sample benefit form from the SSA first, which looks at a 40-year-old woman named “Wanda Worker” who earns $47,000 a year.
Here’s what you should look for:
Compared to the tangled mess that 401(k) statements can become, deciphering your Social Security benefits statement is child’s play. The document is less than five pages long and all the good stuff is on pages 2 and 3.
On Page 2, look for the section labeled Your Estimated Monthly Benefits. This is where you’ll see a comparison of what your monthly benefits will be depending on when you start withdrawing: ages 62, 67 (full retirement age for people born after 1960), and 70.
Given that more than half of workers start tapping their benefits at 62, this is a section you do not want to gloss over. The later you wait to draw your benefits, the larger they’ll be. The table above makes it crystal clear that if “Wanda” waits to start withdrawing benefits until 67 — instead of starting at 62 — she’d see 40% higher monthly benefits.