by AMAC’s Certified Social Security Advisor C.J. Miles
Association of Mature American Citizens
QUESTION: I will be 66 in a few months. I went ahead and filed for Social Security because I already retired from my job and needed the extra income. I really didn’t think filing a few months early would reduce my benefit all that much, but I was shocked when I saw how low it turned out to be! People have told me that your benefit is based on your highest 10 years of earnings. For me, those 10 years were pretty good. Even though I was a stay-at-home mom for a large portion of my working years, the years I worked full time I made between $60,000 and $90,000, so of course I expected a decent Social Security check. So why is it so low? I checked and I already know I don’t qualify for an ex-spouse benefit, so is there anything else I can do?
ANSWER: Even though I do not know your actual benefit amount, based on what you described it sounds like your benefit may actually be correct. Your benefit amount is not determined based on your highest 10 years of earnings – it is actually based on your highest 35 years of earnings. You may have heard 10 years because that is the amount of time you need to qualify for benefits. So let’s say over your lifetime you worked 20 years. For 10 of those years, you earned $60,000-$90,000. For the other 10 years you earned much less. The Social Security Administration (SSA) determines your benefit amount using your highest 35 years of earnings, so what about the other 15 years? The SSA will use the $0 you earned and average that in to determine your monthly benefit. Based on your situation where you were a stay-at-home mom for a long time, I would assume you have many years of $0 averaged in and/or low income due to part-time work.
If you want to make sure all of your earnings have been taken into account, look at your earnings statement from the SSA which shows you every year that you paid Social Security taxes and how much you paid. If you notice any discrepancies on the statement, notify SSA so they can update your information and adjust your benefit accordingly. Keep in mind, though, that your 2014 earnings may not have shown up on your statement yet. Every year the SSA automatically recalculates everyone’s benefits to adjust them for the prior years’ earnings; however, it may take a few months for the adjustment to go into effect while the earnings are reported and processed during tax season.
As for the reduction for filing a few months early: Every month does make a difference; however, it is less than 1% per month. For example, if you were supposed to get $1,000 at age 66 and you filed 3 months early, your benefit amount would be $983.30. So no, it would not have made a huge difference in this case. It sounds like your low benefit amount is due to your average earnings and not because of filing early.
QUESTION: I kind of remember getting an estimated benefits statement from Social Security in the mail every year, but I can’t remember when I got the last one. Should I be concerned? I heard I might be able to check this information online, is that something I should do?
ANSWER: You should not be concerned at all. In order to save administrative costs, the Social Security Administration (SSA) stopped mailing the annual paper statements you are referring to. However, in 2014 the law changed again and now people will receive a statement every 5 years at ages 25, 30, 35, 40, 45, 50, and 55. People who are 60 and older will get a paper statement every year. This new rule ONLY applies to people who do NOT have an online account. So if you sign up for an online account (called mySocialSecurity) you will no longer receive a paper statement, regardless of your age.
The SSA strongly encourages having a MySocialSecurity account because it is relatively quick and easy. You can check your estimated benefits, view and verify your annual earnings, change your mailing address, manage your direct deposit, etc.
Once you receive your statement, whether in the mail or online, you should review it for accuracy. After all, the earnings record on the statement is what will determine your benefit amount when you decide to retire. If any earnings earlier than the year before are incorrect, call the SSA at 800-772-1213 from 7am-7pm and be sure to have your W-2 ready. Keep in mind that anything from the current or prior year may not have been processed and updated yet. This is another advantage of having an online statement – you can check it at any time as often as you would like.
To ask a question about Social Security contact AMAC’s C.J. Miles at cmiles@amac.us.
The information contained in this article is for general information purposes only. Every individual’s situation is unique and you should make your benefit choices according to your personal needs. Furthermore, AMAC and its affiliates do not provide legal or accounting services. Please contact a licensed professional for such advice.
