Social Security is a cornerstone of most Americans’ retirement plans. And with most workers woefully behind on their retirement savings, Social Security could be the only thing that keeps some people’s financial heads above water.
Since you’re reading this website, that’s most likely not you. But it’s important for everyone to take an active part in keeping their Social Security earnings record accurate and up to date. Incorrect information could cost you hundreds of dollars per month at a time in your life when you need as much income as you can get.
How Social Security Works
To understand the importance of your earnings record, you have to know how Social Security works. Each of your paychecks includes a deduction for Social Security based on your earnings. In fact, 6.2 percent of your paycheck is deducted as a Social Security contribution, and your employer pays another 6.2 percent. If you’re self-employed, you pay the full amount. Because your contribution is based on how much you make, your monthly benefit is also based on your salary.
When you apply for benefits, Social Security adjusts your reported wages for inflation and then averages the past 35 years of earnings and applies a formula to arrive at what it calls your “primary insurance amount.” Depending on a few other factors, such as when you start collecting benefits, that amount determines your monthly benefit check.
What happens if your employer reports your earnings incorrectly, doesn’t report them at all or for some other mystery reason Social Security doesn’t have a record of some years? The answer is simple yet disturbing: You miss out on money you’re entitled to receive. That’s why you have to carefully monitor your Social Security earnings record.
In 2017 Social Security announced that it would stop mailing paper statements to most people. That means that you have to go to the Social Security website and register. Once you do so you have access to your statement on the website, and Social Security will even send you a yearly e-mail reminding you to check your statement.
Your account will list the earnings that were taxed. Compare those earnings to your W-2 over past years. If the numbers don’t match or years are missing, contact the Social Security office to make corrections.
It Takes a While
If you don’t see anything for the past couple of years, that’s not necessarily cause for alarm. With millions of records to consider, it sometimes takes Social Security one or two years to update all accounts. Even if you have numbers listed for the past two years and they appear inaccurate, Social Security might be in the process of updating. Don’t be alarmed unless the missing or inaccurate information is at least three years old.
Other Items to Check
Make sure that all of your personal information is correct and up to date on the Social Security website. Additionally, check your W-2s and with your current employer to make sure your company has the correct Social Security number for you and its numbers match your records. If you haven’t been keeping your own earnings records, now is the time to start. It’s always possible that what your employer reports on the W-2 is inaccurate.
The longer you wait, the harder it is to prove that the numbers on file with the Social Security office are inaccurate. You might lose records, separate from your current employer, move out of state or experience a variety of scenarios that make collecting verifiable information more difficult. If you make it an annual habit to check your earnings statement, it’s much easier to correct errors.