Yesyou don’t have to be an expert in social security benefits, but it is worth having a working knowledge of the issues that can directly affect your social security benefits and how much money you are entitled to and when.
Since you started working, Social Security has recorded your reported earnings under your name and Social Security number. And Social Security updates your records every time your employer (or you, if you’re self-employed) reports your earnings.
Your income determines your benefit amount and if your earnings are incorrect, you may not receive all the benefits you are entitled to.
How to Check Your Earnings Record
In the past, Social Security has emailed you a statement saying: your earnings record and benefit estimate. Today however, you need to create a “my social security” account to view your income statement. You can do that here.
Keep the following in mind when checking whether your earnings record is correct or not. First, there is no statute of limitations on correcting errors related to wages, according to Kurt Czarnowski, a director at Czarnowski Consulting.
“A person must deliver proof of what the right amount of income was,” Czarnowski said during a recent National Association of Personal Financial Advisers conference. “But even if it’s something from 1976, if (you) happen to have (your) W-2, (you) can make that correction.”
However, that’s not true when it comes to correcting self-employed income errors on your Social Security statement. you only have three years, three months and 15 days to correct those mistakes, Czarnowski explained.
Check your benefit estimate
Checking your estimated Social Security benefit on your statement is another helpful exercise, according to Czarnowski.
Once upon a time, Social Security just let you know what your estimated benefit would be at three different ages: 62, your full retirement age (which varies based on the year you were born), and 72. The new statement is much more helpful. It provides estimates of your monthly benefit at any age, from 62 to 70, including your full retirement age.
How to decide when to claim Social Security?
Think less about when to claim Social Security and more about what you can do.
“Once (you) understand what (you) can do, (you) are in a position to decide what to do,” Czarnowski said.
One thing that is critical to learn is your full retirement age or FRA. That is the age at which you are entitled to your full pension. And your year of birth determines your FRA.
“People have a better idea of what they can get from Social Security at different ages,” Czarnowski said.
You can find your FRA per year of birth on the Social Security website.
But you don’t have to claim with FRA. You can even start receiving benefits as early as age 62 or as early as age 70. However, if you start receiving benefits early, your benefits will be permanently reduced by a small percentage for each month before your FRA. And if you defer your benefits beyond FRA, you qualify for deferred retirement credits that would increase your monthly benefit.
But no matter when you claim, make it an informed decision, Czarnowski said.
How is your benefit calculated?
Social Security actually calculates your benefit based on the monthly average of your 35 highest earning years, not your last five years, nor your highest three years, Czarnowski said.
And if you don’t have 35 earning years, zeros are put into the calculation, and that lowers your monthly average and therefore your benefit.
What is social security for?
As a general rule, Social Security will replace approximately 55% of a low earner’s pre-retirement salary, 41% of a medium earner’s pre-retirement salary, and 34% of a high-earner’s pre-retirement salary.
“By no means, high, low, or medium earner does it replace 100% of what someone earns,” Czarnowski said. Rather, it is intended as a basis for one’s retirement income.
You can work and still receive benefits
If you are under FRA, there is a limit to how much you can earn and still receive full Social Security benefits, according to Social Security. If you are under FRA through all of 2022, Social Security will deduct $1 from your benefit for every $2 you earn over $19,560. If you reach FRA in 2022, Social Security will deduct $1 from your benefits for every $3 you earn above $51,960 until the month you reach FRA.
You can start again
When you start with your benefit, you can change your mind. You can cancel or withdraw your application up to 12 months after you have become entitled to a pension benefit. You can reapply later, but unlike in the past, you are limited to one withdrawal per lifetime.
“The decision to start collecting retirement benefits doesn’t have to be final,” Czarnowski said.
Another option for those who started collecting before FRA is something the voluntary suspension of payment. With this tactic, you would voluntarily request to suspend your retirement benefits at full retirement age and wait to receive your benefits at a higher amount. And you can make this request start and stop your benefits as often as you like between FRA and 70, Czarnowski said.
However, keep in mind that if you suspension of your benefit, anyone receiving benefits on your work record will also be suspended, Czarnowski said. However, the divorced spouse can continue to receive them.
How partner and survivor benefits work
If the higher earner waits to collect until age 70, his or her spouse, the lower earner, will receive 50% of the higher earner’s FRA benefit — not 50% of the age 70 benefit. But if the highest earner dies after being cashed out at age 70, the surviving spouse will receive the deceased’s 70-year benefit.