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We covered the Social Security annual benefit statement in depth in another article, but there is a portion of the statement that is a constant source of misunderstanding – the projection portion at the top of page 2.
If you’ll take a look at this portion of the statement, you’ll see a projection of your Social Security retirement benefits, at Full Retirement Age (whatever that is for you), at age 70, and at age 62. Also listed are the amounts that you would receive for Disability Benefits, as well as amounts that your family would receive upon your death as survivors. What gets missed for many folks is the part at the top which reads:
At your current earnings rate, if you continue working until…
With that short phrase comes a great deal of confusion and misunderstanding. What this means is that, when you receive this document, assuming that you are something less than Full Retirement Age (FRA), the statement reflects a projection of your future earnings from now until those projected ages (62, FRA, and 70) – and those amounts provided are based upon that projection.
If, for example, you chose to stop working at age 62 and delay receiving benefits until FRA, the benefit that you’ll receive will likely be less than the amount shown on your statement… because you did not continue earning at your current rate to FRA, as the projection assumes.
Another example is where you continue working, but your income has been reduced, due to layoff or other dramatic change in your employment. With the jobs outlook being the way it has been over the past few years, it’s not hard to imagine a situation where this might be the case.
There are several calculators available on the Social Security website that can help you to get a clearer picture of your actual benefit if your projected earnings will be something different than what you’ve experienced up to the present (or actually, up to two years ago, since that’s all the more that is generally covered with the statement).