Social Security benefits are a significant source of retirement income for millions of Americans, yet surprisingly, most people have little idea of what they’ll receive when they retire.
Only 11% of Americans who haven’t retired yet know the exact amount they’ll receive from Social Security, according to a survey by the National Institute on Retirement Security.
This article will guide you through estimating your Social Security benefits, helping you feel more prepared for a financially secure retirement.
Why Knowing Your Social Security Estimate Matters
For many retirees, Social Security is a primary income source. As of 2024, around 68 million Americans receive Social Security benefits, which totals about $1.5 trillion annually.
The average retiree benefit stands at $1,918 per month, while high earners retiring at full retirement age in 2024 could receive a maximum of $3,822 per month. Understanding your expected Social Security income early can shape your broader retirement plan:
- Helps with budgeting: Knowing what you’ll get from Social Security allows you to determine whether you’ll need additional income sources.
- Avoids surprises: If your projected benefit is lower than expected, you’ll have time to make adjustments, such as increasing retirement savings.
- Influences lifestyle choices: With an accurate estimate, you can make informed decisions about spending and saving.
Steps to Get Your Social Security Estimate
The Social Security Administration (SSA) makes it easy for you to check your future benefits by providing a “My Social Security” account, where you can access your personalized statements. Here’s how to get started:
- Create a My Social Security Account
Head to the official SSA website and set up an account if you haven’t already. This portal gives you access to your annual Social Security statements. - Review Your Social Security Statement
Your statement includes an estimate of monthly benefits based on your past earnings and retirement age. Regularly reviewing this statement ensures all income data is correct and up-to-date. - Request a Paper Statement (if age 60+)
If you’re over 60 and don’t have an online account, the SSA still sends paper statements by mail.
Understanding Your Social Security Estimate
Your Social Security estimate is calculated based on your lifetime earnings and your age at retirement. Here’s what your statement can tell you:
- Replacement Rate: Social Security is designed to replace a portion of your pre-retirement income. For instance, if you currently earn $20,000 monthly and your estimated Social Security benefit is $4,000, Social Security would replace about one-fifth of your pre-retirement income.
- Income Gaps: If your earnings record falls short of 35 years, the estimate may appear higher than what you’ll receive since the calculation assumes a full work history.
- Cost-of-Living Adjustments: The estimate doesn’t project future cost-of-living adjustments (COLAs), which are essential to keep up with inflation over time.
Why Regularly Checking Your Statement Matters
For those approaching retirement age (62–70), keeping tabs on your Social Security statement annually is particularly important. Cost-of-living adjustments and current income reporting accuracy can influence your future benefits.
- Verify Income Reporting: Mistakes in reported income can reduce your benefits, so it’s essential to check that your yearly earnings are accurately recorded.
- Plan for Adjustments: Since COLAs vary yearly, understanding how they impact your benefits can guide your retirement budget.
Final Takeaways
Knowing your Social Security benefits is crucial for creating a realistic retirement plan. Here’s a quick recap of the steps:
- Set up a “My Social Security” account for easy access to your statement.
- Review your income history to ensure accurate reporting.
- Understand the estimate’s limitations, especially regarding COLAs and your earnings record.
With these steps, you’ll be better equipped to plan for retirement with confidence, knowing exactly what to expect from Social Security.
