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Why are fact sheets important for Social Security?

The fact sheets are designed to provide clarity and useful information, based on your age group and earnings situation. They can help you better understand Social Security programs and benefits.

Why did we redesign the statement?

We redesigned the Statement to make it easier for you to read and find the information you need!

When do you get your Social Security statement?

For workers age 60 and older who do not have a my Social Security account, we currently mail Social Security Statements three months prior to your birthday.

How is Social Security calculated?

Social Security benefits are based on a worker's lifetime earnings in Social Security–covered employment. The benefit computation accounts for covered earnings up to each year's maximum taxable amount. Annual earnings are indexed—based on the national average wage index ( AWI )—to the year the worker reaches age 60, 2 years before the age of first eligibility, to ensure that benefits reflect the general rise in the standard of living that occurred during the worker's career. 4 The highest 35 years of wage-indexed earnings are averaged to compute the worker's average indexed monthly earnings ( AIME) and then the worker's AIME is used to calculate the primary insurance amount ( PIA ). 5 The PIA is the initial benefit amount before any adjustments for either early or delayed retirement, subsequent cost-of-living adjustments, or other offsets such as the retirement earnings test or Government Pension Offset.

How is the actual PIA calculated at different ages?

In order to make the benefit estimates calculated at different ages in different years comparable, the actual- PIA computations were deflated by the AWI back to each Statement age. 14 For example, the estimated benefit calculated at Statement age 30 would be based on wage indexing up to age 28, while the actual PIA would index earnings up to age 60 and then be deflated by the AWI back to age 28. Deflating the actual PIA puts that amount on par with the estimated benefit calculated at Statement age 30.

What if Jane has no earnings in 2019?

If Jane had no earnings in 2019, then SSA assumes that her future earnings will be the same as her earnings in 2018 (2 years prior to her year of Statement receipt). If Jane had no earnings in both of the 2 years prior to Statement receipt, then SSA estimates her benefits assuming that she will have no future earnings.

Why is the Social Security Statement important?

The Social Security Statement is one of the Social Security Administration's ( SSA 's) most important ways to communicate with the public. Because a worker's complete lifetime earnings are unknown at the time his or her Statement is prepared, SSA estimates his or her future benefits by using the worker's historical earnings to project future ...

How does SSA estimate future earnings?

6 SSA uses the worker's past earnings (wage-indexed to the year 2 years prior to Statement receipt) to project future earnings by assuming that the worker continues to earn the same amount as in the year prior to the year of Statement receipt. If there were no earnings in the prior year, then SSA assumes that future earnings are the same as the earnings in the year 2 years prior to the year of Statement receipt. If there were no earnings in both of the 2 years prior to the year of Statement receipt, then SSA assumes no future earnings. For example, consider Jane, a worker with earnings in 2019 of $50,000. For her 2020 Statement, SSA estimates her future benefits by assuming she earns $50,000 in 2020, 2021, and all future years until retirement. If Jane had no earnings in 2019, then SSA assumes that her future earnings will be the same as her earnings in 2018 (2 years prior to her year of Statement receipt). If Jane had no earnings in both of the 2 years prior to Statement receipt, then SSA estimates her benefits assuming that she will have no future earnings. In other words, if Jane did not have any earnings in 2018 and 2019, then the benefit estimate in her 2020 Statement is based on the assumption that she earns $0 in 2020, 2021, and all future years until retirement.

What is the purpose of a Social Security statement?

The Social Security Statement is one of the Social Security Administration's ( SSA 's) most important ways to communicate with the public. The Statement provides millions of American workers with their earnings record; their estimated retirement and disability benefits; their dependents' estimated survivor benefits; and general program information. ...

How many credits are there for Social Security?

The Statement provides personalized estimates of future retirement benefits for fully insured workers; that is, workers who have earned 40 credits in Social Security–covered work. Covered employment refers to jobs for which employers submit payroll-tax deductions to the Internal Revenue Service ( IRS) and report annual wages to SSA to determine a worker's eligibility for Social Security benefits and the amount of those benefits. Taxable wages are wage and salary earnings in covered employment equal to or less than an annually adjusted threshold amount called the taxable maximum. 2 In 2020, a worker earns one credit for each $1,410 of wages or self-employment income in Social Security–covered work, up to a maximum of four credits each year. 3

What is the benefit estimate on a retirement statement?

The benefit estimate on the statement takes into account your prior earnings as reported by your employers and recorded onto your earnings history.

Why would someone with a low earnings history who continues to work at a higher-than average salary see an improvement?

On the other hand, someone with a low earnings history who continues to work at a higher-than average salary would see an improvement in the benefit because the estimate is based on lower earnings.

Does the Windfall Elimination Provision reduce the estimate?

And if you ever worked in a job that didn’t pay into Social Security NO FICA taxes withheld), the estimate shown on the statement does not take into account the Windfall Elimination Provision (WEP), which could reduce the estimate by as much as $400. You can adjust for the WEP using the SSA WEP Calculator on the same website.

What is an earnings statement?

That document contains a few vital pieces of information. First, it summarizes annual wages that count toward calculating Social Security benefits. Next, it gives an estimate of what an individual's future monthly benefit might look like in retirement.

Why is it important to check your earnings statement each year?

It's important to check your earnings statement each year. If you don't, and your wages are accidentally underreported, it could leave you with a lower monthly benefit for life.

How often do Social Security companies issue earnings statements?

The Social Security Administration issues earnings statements every year.

What age do you have to be to collect your retirement?

Under the current design, your earnings statement will show you what your retirement benefit will look like at ages 62 and 70, as well as your full retirement age, which is when you're entitled to collect your benefit in full. Age 62 is the earliest age to file for benefits, while age 70 is the latest age you can accrue ...

What is the earliest age to file for unemployment?

Age 62 is the earliest age to file for benefits, while age 70 is the latest age you can accrue the delayed retirement credits that boost your benefits. The new version, meanwhile, will show you what your estimated monthly benefit looks like for each year between the ages of 62 and 70.

How much of your income should you replace in retirement?

The importance of estimating your future benefit. As a general rule, you should aim to have enough annual income in retirement to replace about 70% to 80% of your ending salary. Now Social Security won't help you reach that goal by itself. Those benefits will only replace about 40% of your income if you earn an average wage.

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How does the SSA use past earnings?

The SSA uses the worker’s past earnings to project future earnings by assuming that the worker continues to earn the same amount as in the year prior to the year of Statement receipt. If there were no earnings in the prior year, the SSA assumes that future earnings are the same as the earnings in the year 2 years prior to the year of Statement receipt. If there were no earnings in both of the 2 years prior to the year of Statement receipt, the SSA assumes no future earnings.

How are Social Security benefits calculated?

Social Security benefits are based on a worker’s lifetime earnings in Social Security-covered employment up to each year’s maximum taxable amount. Each year’s annual earnings are wage-indexed to the year the worker attained age 60 (2 years before the earliest Social Security eligibility age) to ensure the benefits reflect the general rise in the standard of living that occurs during a worker’s career. The highest 35 years of wage-indexed earnings are averaged to compute the worker’s Social Security benefit. However, because a worker’s lifetime earnings are unknown until the worker applies for Social Security benefits, the SSA estimates benefits for the Statement by projecting the worker’s future earnings until retirement.

Is the SSA estimate accurate?

Bottom line: If you are an older worker ( i.e., at least age 60), the SSA’s benefit estimate is likely to be reasonably accurate, and this is all the more true if you are male.