Do you know how much Social Security you would draw upon retirement at the wages you have earned thus far in your career? If not, then you need to pay more attention to the four-page Social Security statement that comes each year about three months before your birthday. It could be a wake up call to do more to beef up your personal retirement savings program.
Many people have come to believe that since they have paid Social Security taxes all these years, that Social Security should be enough to support them in retirement. That’s why the Social Security statements, which the government has been providing since 1999, can be illuminating. Social Security isn’t as much as many people believe, and the program was never meant to provide for all of a worker’s financial needs in retirement.
Some who receive their annual Social Security statements in the mail may be in for a shock. They realize the amount they would receive wouldn’t support them now, let alone in the future when inflation has taken a toll.
So, are the statements a wake up call for many Americans?
“We hope so,” said Walter Howell, associate state director for AARP in Mississippi. “What AARP has done in parts of the country is set up programs of financial management and planning for retirement. In all of our printed material we really stress the importance of good planning for your retirement. For AARP members, it is a little late for them. Our membership is 50-plus. People in their 20s and 30s need to be thinking about this. They need some type of counseling about retirement planning when they enter the workforce. When people become employees and start contributing regularly to Social Security, they should get information about the importance of retirement planning.”
AARP has consistently said over the years that a person should have four pillars of retirement: 1. Good health insurance coverage. 2. Social Security benefits. 3. A pension or retirement plan. 4. Personal investments.
“We realize everybody doesn’t have that,” Howell said. “The Social Security benefits are the only retirement benefit that almost 30% of the population of the country has. That is why Social Security is so important. But we encourage people as they plan for their retirement to have those other pillars in place. It is particularly important for women who may have been in the workforce only a part of their adult life.”
Shawn Mercer, public affairs specialist with the Social Security Administration in Hattiesburg, said the Social Security statement could be the most valuable financial planning tool a person receives. Since the statement is an estimate, it is based on the assumption that the individual will work until age 62 (for reduced retirement benefits) or full retirement age (currently age 65 and 4 months) and make at least last year’s earnings. If individuals leave the work force or reduce their earnings prior to age 62, the statement may not be accurate.
Mercer said a Social Security statement can be requested at anytime on the Website www.socialsecurity.gov/onlineservices/#statement.
Financial planning is not the only function of the statements. They can also be used to correct any errors soon after they happen rather than having to go back a decade or longer to verify earnings that might have been missed.
“Carefully review your statement annually and contact Social Security immediately to correct any mistakes such as incorrect/missing earnings,” Mercer said. “Last year’s earnings may not be posted yet, but if you are missing earnings other than last year’s, you need to contact Social Security.”
Mercer said they hope people take the time to realize what benefits they have with Social Security such as retirement, survivors and disability.
“Then they can use their Social Security benefits as a foundation to build on for their financial future,” he said.
In Mississippi, there are a total of 531,390 Social Security beneficiaries whose checks average $717 monthly. That includes 280,600 retired workers who receive an average of $814 monthly. The number of their dependents is approximately 30,230 with an average monthly benefit of $413. The state has 94,250 disabled workers who receive an average monthly benefit of $545. Disabled workers’ dependents number 34,980 and receive an average monthly benefit of $219. Survivors number 91,330 and receive an average monthly benefit of $644.
Despite the sobering statistic that about one out of three current 20-year-olds will be disabled by age 67, it is estimated that 70% of the workforce has no long-term disability insurance.
“Social Security provides disability coverage for a worker with a family equivalent to about a $353,000 disability policy,” Mercer said. “Even though few workers have private long-term disability insurance coverage, almost all workers do have disability protection with Social Security.”
Women traditionally earn less because of the years devoted to child rearing and other factors such as earning less than men for comparable jobs. They also live longer. But Social Security is gender neutral: individuals with identical earnings histories are treated the same in terms of benefits.
However, Mercer said that due to certain demographic trends, women benefit from the Social Security program in several ways:
• With longer life expectancies than men, elderly women tend to live more years in retirement and have a greater chance of exhausting other sources of income. They benefit from Social Security’s cost-of-living protections because benefits are annually adjusted for inflation.
• The Social Security system is progressive in that lower-wage earners receive a higher percentage benefit than higher-wage earners do. The system returns a greater percentage of pre-retirement earnings to a lower-wage worker than to a higher-wage worker. Women who are low-wage workers receive more benefits in relation to past earnings than do high-wage earners.
• Social Security provides dependent benefits to spouses, divorced spouses, elderly widows, and widows with young children.
Women are more likely to be widows than men are to be widowers. A widow does have the option of using her spouse’s Social Security amount rather than hers if there is a major difference.
Divorced women may be eligible for benefits from an ex-husband if they were married for at least 10 years and they meet other factors such as age, not remarried, disabled, and are not eligible for a higher benefit on their own number. A divorced woman can check on her benefits from an ex-husband, but would need to provide his Social Security number.
Mercer said the Social Security Administration cannot give her any information about his benefits, but can tell her what she may be entitled to on his record.
Women represent 58% of all Social Security beneficiaries age 62 and older and about 71% of beneficiaries age 85 and older. At the end of 2002, women’s average monthly retirement benefit was $774. Men’s average benefit was $1,008. The Website www.socialsecurity.gov/ women contains more information of interest to women.
Contact MBJ contributing writer Becky Gillette at email@example.com.