Using Social Security online: A real time-saver
You might think that dealing with a federal agency, such as the Social Security Administration (SSA), means long lines in some office near you. Not so: If you're an adult, you can monitor your benefits situation with a few clicks of the keyboard and start serious planning for your retirement income.
The my Social Security accounts give you the chance to change direct deposit of your benefits if you already receive Social Security, as well as request a replacement Medicaid card or order SSA tax documents, among other services. To qualify for an online account, you must be at least 18 and have a valid email address, a Social Security number and a U.S. mailing address.
A my Social Security online account also starts your next considerations in planning for benefits. Once you set up the account, you can review your Social Security statement — a key move since earnings determine your future retirement benefits and,according to the SSA, you cannot normally correct your earnings after three years, three months and 15 days from the end of the taxable year in which your wages were paid.
(Average monthly benefits max out at some $2,600 a month for most workers in 2015, according to SSA figures.)
You can correct your record after that length of time to:
Confirm records with tax returns filed with the Internal Revenue Service;Fix errors due to employee omissions from processed employer reports or missing reports;Rectify mistakes "on the face of the record," that is, errors Social Security can find after examining agency records of processed reports; and Include wages that an employer reported as paid to you but that don't appear in SSA records.
Once you verify your earnings, you're ready to figure where benefits fit into the whole picture of your retirement income. In his study "Does the Social Security 'Statement' Add Value?," Steven Sass of the Center for Retirement Research at Boston College states:
"Social Security is the nation's most important source of retirement income, providing half or more of the monthly income of well over half of all retired households . . . Benefits, however, are set by a complicated formula based on a worker's lifetime earnings record at retirement … Workers, on their own, cannot be expected to know how much they could get."
For instance, the study finds that reviewing your records generally leads to an understanding that claiming benefits later increases monthly Social Security income. No evidence, though, indicates that just because most people understand this concept they do delay retiring: Most look at planning for retirement only in terms of saving and investment and not in terms of working longer — the latter of which can drastically increase savings and benefits.
When planning for your retirement, envision what living in the golden years will look like and then work backward. What standard of living do you want in those years? Will you spend more or less on maintaining a home, on grandchildren, travel, health care or taxes?
How much will you get from Social Security? Will you run out of money during retirement? How much will you need to supplement Social Security with savings and other sources – and how do you accumulate those additional savings now?
Waiting a few more years before retiring and filing for Social Security raises your monthly benefit with Delayed Retirement Credits (DRCs); these include a 5.5% increase in your eventual benefits per year of delay if you were born in 1933 or 1934, a 7.5% yearly increase if you were born in 1941 or 1942 and an 8% increase in you were born in 1943 or later.
Delaying filing can also of course decrease additional savings you need to maintain your desired standard of living and can shorten the number of years that you eventually draw on savings.
Using my Social Security constitutes only one part of your overall retirement planning. Take the time to review your account atmy Social Security and then speak with a qualified adviser who can help you integrate your benefits with your planning for retirement income and taxes.
MORE: Stocks' woes: Blame dollar, oil
MORE: Bequeathing 401(k)s, IRAs
MORE: Retirement: Reality vs. Delusion
AdviceIQ -- @adviceiq on Twitter -- is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.