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Knowing their expected income can help employees determine an adequate savings rate
The U.S. Social Security Administration (SSA) has launched a portal that enables workers who have paid into the Social Security system to view their personalized earnings and benefits information. The new online Social Security Statement replaces the annual paper statement that
was suspended for those between the ages of 25 and 60. [Update:
Agency Resumes Mailing Social Security Statements, Encourages Online Accounts.]
Individuals age 18 and older can register at
www.socialsecurity.gov/mystatement and, after answering a series of identifying questions, create a “My Social Security” account with a unique user name and password. Once the information is verified, they can access their online statement and view the benefits that the Social Security system intends to provide.
“Our new online Social Security Statement is simple [and] easy to use and provides people with estimates they can use to plan for their retirement,” said Michael J. Astrue, commissioner of Social Security, in a released comment. "The online statement also provides estimates for disability and survivors benefits, making the statement an important financial planning tool. People should get in the habit of checking their online statement each year, around their birthday, for example.”
The SSA portal includes links to information about other online services such as applications for retirement, disability and Medicare, Astrue noted.
In addition to helping with financial planning, the online statement provides a convenient way for employees to determine whether their earnings are posted accurately to their Social Security records. This feature is important because Social Security benefits are based on average earnings over a person’s lifetime. If the earnings information is not accurate, the employee might not receive all the benefits to which he or she is entitled.
Determining Replacement Income
The personalized Social Security Statement can be downloaded or printed for financial planning discussions with family or a financial planner. Knowing the amount of expected income from Social Security can help employers to determine whether they are saving enough through employer-provided retirement plans and individual retirement accounts to provide an adequate replacement income in retirement. Retirement income can be estimated using free online tools such as
AARP's Retirement Income Calculator and the SSA's
Many retirement experts counsel their clients to aim for income in retirement that replaces at least 70 percent of their final year’s salary in order to maintain the standard of living in retirement that they experienced while working (see the
SHRM Online article "Secret to a 401(k) Plan’s Success: The Income Replacement Ratio").
Some advisors encourage aiming to replace an even higher level of income. "For many, target income replacement ratios should be higher than the 70-75 percent ratio conventionally accepted as a rule of thumb," states a May 2012
position paper from the Retirement Advisor Council, a trade group.
“When actuaries look at a defined contribution plan, they consider individual needs and come up with a replacement income of about 80 percent, and some even go as high as 100 percent because of the unpredictability with rising medical costs,” said Sandy Pappa, a principal with Buck Consultants in Pittsburgh.
The SSA says it expects that some Americans will not be able to be verified through this process. Some might not answer the security questions correctly based on information on file, and others might supply identifying information that does not match their Social Security records. In instances where this occurs, people will have the option to request that a paper Social Security Statement be mailed to them. In addition, those who cannot verify online initially may visit their local Social Security office and present an identity document in order to create an account and gain access to the online version of the statement.
In February 2012, Social Security resumed mailing paper statement to workers age 60 and older if they were not already receiving Social Security benefits. The agency also plans to mail paper statements to workers in the year they reach age 25.
is an online editor/manager for SHRM.
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