Millions of seniors today rely on Social Security to cover their living expenses. But there are many variables that go into determining what a given recipient's monthly benefit will look like.
One such factor is the age at which benefits are claimed. Seniors who wait until full retirement age (which is either 66, 67, or somewhere in between, depending on year of birth) to sign up for Social Security get their full monthly benefit without a reduction. Meanwhile, those who sign up starting at age 62 but before full retirement age get a reduced benefit, while those who delay their filings beyond full retirement age get a boosted benefit.
Another factor that goes into determining benefits is lifetime wages. Benefits are calculated by taking workers' earnings during their 35 most profitable years in the labor force, adjusting those numbers for inflation, and then applying a special formula.
As a general rule, the higher one's wages are, the higher one's Social Security benefit will be in retirement — though that rule only applies to workers whose earnings don't exceed the annual Social Security wage cap. But in some cases, Social Security recipients may be losing out on a higher monthly retirement benefit due to incorrect information being reported about their wage histories. Now, a new bill is trying to change that.
Introducing the Know Your Social Security Act
Last week, the Know Your Social Security Act was introduced as a bipartisan proposal, and its goal is to make Social Security earnings statements more accessible to the public. Each year, the Social Security Administration (SSA) issues a statement summarizing workers' wages for the year. But it only mails those statements out to those who are 60 and older.
Those who are younger won't automatically receive statements in the mail. Rather, they can access their statements by creating an account on the SSA's website. But not everyone knows to take that step, and as such, some people may be missing out on an opportunity to review their yearly earnings statements.
That's a problem, though. Earnings statements aren't always correct, and if wages are underreported, it could result in a lower retirement benefit. The Know Your Social Security Act would require the SSA to mail annual earnings statements to anyone aged 25 and older. That way, workers will have an easier time reviewing their wage data, and they'll know to correct mistakes that work against them.
In addition to summarizing wages, annual earnings statements also give recipients an estimate as to what their monthly retirement benefit might look like. That piece of information is an incredibly important thing to have in the course of retirement planning.
If the Know Your Social Security Act passes, workers won't have to receive their earnings statements in the mail — they'll be able to elect to receive them electronically. But the point, either way, is that lawmakers are pushing to make that information more accessible to the public, and it could result in higher benefits for a lot of people.
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