Beware This Common Social Security Planning Mistake
Americans are way off-target about how much they will likely earn from Social Security during retirement. But taking one simple step can reduce the degree of the error dramatically, according to new research.
People in their 50s and 60s underestimate their future Social Security benefits by an average of $1,896 a year, or 11.5%, according to a recent paper from the National Bureau of Economic Research.
For about one-quarter of adults in that age group, the error is much worse — more than $5,100 annually.
However, those who have received at least one Social Security statement fare better. For these folks, the amount of error drops to an average of $344 annually.
Previously, such statements were mailed directly to individuals, a practice that largely stopped a few years ago. In the study, researchers focused on a period — 1992-2018 — during which many Americans received statements annually from the Social Security Administration.
Today, the best way to get such statements is to sign up for your own individual account at the SSA website.
These statements highlight your earning history as a worker and estimate the benefits for which you are likely to be eligible at various claiming ages.
Properly understanding how much you are likely to earn in Social Security benefits can be an important part of estimating your income during retirement.
One of the paper’s co-authors — Grant Seiter, a senior research associate at the American Enterprise Institute — told AARP that people simply “aren’t that great” at estimating their benefits without the help of the statement:
“Social Security is a huge source of retirement income for most Americans. Having an accurate estimate of the benefit is really important.”
Mailings of statements largely stopped in 2011, although they later started up again on a limited basis, mostly to those who have not signed up for an online account and who are 60 and older. Mailings continue to these Americans until they claim benefits.
AARP has endorsed bipartisan legislation that would resume regular mailings of statements at five-year intervals for workers up to the age of 55 and more frequently for older workers.
For more on opening a Social Security account, check out:
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