The Social Security Administration will send annual benefit claims to American workers for the first time in three years. This is good news, as the statements provide a useful projection of what you can expect to receive at different retirement ages if you become a widower or have a disability that prevents you from working.
But if you receive a statement next month, it's important to know how to interpret the benefit projections. It is likely to be slightly less than the dollar amount you will receive when you apply for benefits, expressed in dollars today, before accounting for inflation.
This is an excellent way to help potential retirees understand social security benefits in the context of the current economy, both in terms of purchasing power and current housing payments. For instance, for a 50-year-old, this approach allows you to illustrate the dollar benefits comparable to those that could know today's benefit. It helps people understand its advantages over today's standard of living.
In part, the plan is to keep social security out of business by predicting future inflation scenarios from the statement that may or may not work. The declaration also provides a starting point for workers to examine the impact of the filing delay.
It provides valuable insight into how postponing the start of benefits from 62 to 70 will raise the monthly amount for the rest of your life, an essential fact that workers must take into account
Unfortunately, the annual statement has nothing when it comes to setting the context around specific benefit values. The only reference in the document to inflation is a warning that the benefit figures presented are estimates. The real figure, it explains, can be influenced by changes in its revenues over time, by any change in the benefits that Congress can deliver and by the cost of living increases after it begins to receive benefits.
And misrepresenting benefits can lead to pension plan failures if the right context is not around you.
Most consultants do a terrible job with expected returns. They choose the wrong ones or overestimate them. Some financial planning software tools apply a single reduction rate (the present value of an amount of future money) to all asset classes: stocks, bonds, and insurance. However, there is a need to do a differentiated calculation of how social security benefits will increase in dollars when you retire compared to other assets.
About these annual allowance requests: The Social Security Administration stopped filing most paper statements in the year 2011. This was in response to budget pressures, saving $ 70 million a year. Instead, the agency is trying to get people to create "My Social Security" accounts on its website (1.usa.gov/1d3xvuZ), which allows workers to download electronic versions of the statement. The move has sparked protests from critics who argue that the statement provided provides workers with valuable reminders each year of what they can expect from the future payroll tax.
From here and vice versa. Social Security announced last spring that it would resume mailing recipients in September, at five-year intervals, for workers who have not signed up for online accounts. The statements will be sent to workers aged 25, 30, 35, 40, 45, 50, 55, and 60.
