Social Security Returns to Snail Mail for Some Statements

Row of Social Security cards. Selective focus.
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Millions of Americans rely on Social Security for income in retirement or when suffering a disability. But figuring out how much in benefits can be challenging.

That's what makes the Social Security statement -- a rundown of your estimated benefits and what factors into those benefits -- so valuable. The Social Security Administration wants to ensure that those records reach Americans. So it's going back to sending out statements by mail. Sort of.

Snail Mail's Back in Vogue

Social Security statements used to be mailed every year, but three years ago, the agency stopped that and made them available on its website. Yet with only 6 percent of American workers signed up for online access at the My Social Security, lawmakers recommended that it find ways to make sure that people got the information they needed. So those who aren't signed up for online access will get statements mailed to them every five years from ages 25 to 60. The statement includes a general description of benefits and how the agency estimates the benefits you're entitled to receive.

The two most important sections apply specifically to you. One tells how much in benefits you and your family would be eligible to receive from Social Security under certain conditions. The other includes the information the agency has about your lifetime earnings. Your statement therefore helps you plan for your retirement and lets you verify that the agency has the correct figures to calculate your benefits.

The agency looks at how much in Social Security and Medicare payroll taxes you've paid to measure your eligible earnings, and so your earnings history may not include income that wasn't subject to these taxes. If you see mistakes, you should contact the agency right away to get your records corrected. If you don't, you may not get as much money in benefits as you should.

If you have a high income, your earnings for Social Security purposes might differ from your Medicare earnings. That's because Social Security imposes a wage cap. For 2013, any amount over $113,700 was not subject to Social Security taxes, and this year, that amount rose to $117,000. Medicare has no such limits, with taxes applying to your entire earnings.

A Look at Your Estimated Benefits

The agency assumes that you'll keep earning whatever you made in the most recent year, and then tells you how much you'll get in retirement benefits at various ages and disability benefits if you need them. In addition, it also tells you how much your spouse and children might be eligible to receive after your death.

These estimates can tell you the impact of retiring early, at your full retirement age, or later, helping you get a handle on your expected income. Also, they can verify whether you're eligible yet even to receive benefits at all. For example, to get retirement benefits on your work record, you need to have earned a minimum amount during 40 quarters, essentially requiring a 10-year work history at some point during your career. Disability benefits require fewer credits, though they must have been earned more recently. Seeing how much your family would receive if something happens to you is also helpful for insurance and estate planning.

So whether you wait to get your statement in the mail or sign up online now, be sure to look at it. By reading your statement, you can track progress toward a financially secure retirement.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google Plus.​

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