Last week the Social Security Administration (SSA) announced it would no longer mail annual statements to workers in an effort to save money and drive citizens to its website. But if you've been relying on those statements to learn about your benefits, what can you do?
One answer is to wait: The SSA is working to provide these statements online, possibly by the end of the year. Not incurring printing and mailing costs for 150 million statements will literally save the federal government millions of dollars each year, and in this day of budget crises, we need to save every dollar we can.
Because people who don't have online access won't be able to easily check their benefit statements, some senior advocates are criticizing the SSA for the change (reminds me of my parents and grandparents mentioning that people objected decades ago to business being conducted over the telephone, because not everybody had access to a phone or even knew how to use one!). This may sound harsh, but online business is the way of the world now. If you don't keep up with technology, you're going to fall behind, no matter what age you are. If you don't have online access, the simple fact is, you'll need to find a friend or relative who can help you.
In the meantime, I hope you didn't throw away your most recent paper statement -- the benefit amounts haven't changed much. For example, the estimates on my latest statement changed by less than $50 per month compared with the previous statement. The reason: There were no increases in the taxable wage base or cost-of-living adjustment from 2010 to 2011. So if you want the most up-to-date information about your benefits, you can still reasonably rely on your previous statement.
Better yet, log in and use the Retirement Estimator on the Social Security website to get an up-to-date estimate of your benefits, based on your wage history. It took me less than two minutes to log in, enter my data, and receive the same estimates that had been mailed to me. The calculator can show your estimated income at age 62, the earliest possible age to start benefits; your Full Retirement Age; and age 70, the latest age to start Social Security income. You can then estimate your income if you retired at different ages -- information the paper statements don't provide.
But what about inflation? Both the paper statements and the online estimator show estimates in current dollars, so you shouldn't need to adjust for inflation when thinking about how your estimated benefits will meet your living needs. Social Security benefits are increased for inflation, so in the future, you should receive approximately the same buying power as shown by the estimates expressed in today's dollars.
One of the most important retirement planning decisions you'll make is when to start your Social Security benefits. You can gain insights into this decision by estimating the total lifetime income you'll receive from Social Security under different retirement ages. Here's how:
On the Social Security website, you can estimate your life expectancy; combine this number with your estimated Social Security income at various ages to estimate the total amount of money you might receive over your lifespan. Suppose the estimate shows that your remaining life expectancy at age 62 is 21 years, getting you to age 83. Also suppose that your estimated monthly income if you start at age 62 is $1,375. Then you'll receive about $346,500 over your expected lifetime (that's $1,375 x 12 months x 21 years).
Now suppose the estimated monthly income if you start at age 66 is $1,822. If you start benefits at age 66 instead of age 62, you'd have 17 years of payments until age 83. In this case, the total amount of income you'd receive over your life would be $371,688 (that's $1,822 x 12 months x 17 years) - more than $25,000 higher than if you started at age 62.
Finally, suppose the estimated monthly income if you start at age 70 is $2,406. You'd have 13 years of payments until age 83. In this case, the total amount of income you'd receive over your life would be $375,336 (that's $2,406 x 12 months x 13 years) - almost $29,000 more than if you started at age 62, and a little higher than if you started at age 66.
The differences in your estimated total lifetime income get even greater if you live beyond your life expectancy. The life expectancy calculator on the Social Security website doesn't consider your family history or your lifestyle; these factors are considered at the calculators you'll find at www.bluezones.com or www.livingto100.com.
The results I described above are typical of most "breakeven" analyses -- namely, if you live to your mid 80s, you're better off delaying the start of Social Security benefits as long as possible.
One thing that's missing from the Social Security website is your ability to check your earnings history and make corrections if there are mistakes. That was one advantage of the paper statements. The SSA plans to provide this information on the online statements.
For most people, here's the bottom line: Start using the online resources at Social Security, and stay tuned for future improvements in the SSA website's capabilities. And just because you don't receive a piece of paper in the mail anymore doesn't mean that Social Security is going away. It's just modernizing and going digital, like virtually everything else.
More on MoneyWatch:
- Social Security Stopped Mailing Earnings Statements
- When Should You Start Social Security Benefits? Do the Math!