CHAPTER
5

Record Keeping

In This Chapter

• Accessing your earnings statement
• How the SSA calculates your benefits
• Reading your statement and correcting any errors
• Contacting the SSA if you find a discrepancy on your statement

There’s a good reason most people believe the Social Security benefits they receive is their money. After all, if they worked, they paid Social Security taxes every year. Why shouldn’t they think of it as their money?

Well, the government and the Social Security Administration (SSA) see things differently. What they do, however, is allow you to earn credits toward your Social Security benefits when you pay your income taxes. The number of credits you need to receive retirement benefits depends on the year you were born.

Determining Your Earnings

If you were born in 1929 or later, you’ll need 40 credits, which amounts to 10 years of work. (You earn a maximum of four credits per year.) For those who, for whatever reason, stopped working before the 10 years is up, those credits will stay on your Social Security record forever.

If you go back to work, you can always add more credits and hopefully reach the 40 you need to qualify. In fact, if you fail to reach that number, you will not receive Social Security retirement benefits, so it behooves you to work at least until you have achieved those 40 credits.

Setting Up Your Social Security Account

How do you find out if you qualify to collect Social Security? You have to look at your Social Security statement. To do that, you may have to set up an account online.

WORTH NOTING

Go to ssa.gov to create your personal Social Security account to help keep track of your earnings, estimate future benefits, or get a letter with proof of benefits if you’re already receiving them.

The SSA has been mailing out statements to those who are eligible for Social Security and are age 60 or older. That may soon cease, however, as all of this information has been migrated online. That means in the future, most of us will have to create an account with the SSA in order to obtain access to our statements online. We suggest you create an account for yourself now.

To do this, go to ssa.gov. Click on the “my Social Security” link, which will enable you to create a new account or to sign in if you already have one.

There are four things you need in order to create your Social Security account:

1. A valid email address
2. Your Social Security number
3. A U.S. mailing address
4. To be at least 18 years old

Once you create your account and access your statement, you’ll find page one contains your name and address, along with a brief message about what Social Security means to you. You’ll immediately want to go to page 2 where the most important information begins. This is where you’ll find out how much you’ll get if you continue working until you reach your full retirement age, either 66 or 67 depending on what year you were born. You can also keep tabs on how much you’ll earn by looking at this page.

Keeping Tabs on Your Earnings

Page 2 shows the breakdown of your benefits so you can better understand what you’ll be receiving. First, you’ll see what you’ll receive each month at full retirement age. Next, you’ll see what you would receive at age 70, and finally what you would get if you took early retirement at age 62. The next section deals with disability and how much you would receive if you became disabled.

After disability, you will find information pertaining to family benefits if you were to die. For example, there’s a line for any children under 18 and how much they would receive, followed by your spouse who is caring for your child and what he or she would receive, and then what your spouse would receive after reaching full retirement age. The last line in this section is the maximum benefit your family could receive each month.

There’s even a paragraph stating whether you have enough credits to qualify for Medicare at age 65. You should contact the SSA three months before your 65th birthday to enroll in Medicare even if you don’t plan to retire until later.

You’ll also see an interesting statement in bold punctuated with an asterisk (*). It states that your estimated benefits are based on current law, but that Congress can change the law any time it wants. Expect the current law covering benefits to change because, as noted previously, by 2033 the payroll taxes collected are expected to only be enough to pay for about 75 percent of everyone’s scheduled benefits.

The next section of your statement explains how your benefits are estimated.

WORTH NOTING

SSA discontinued paper statements in 2011 in an effort to save money on printing and postage. In September 2014, it announced it would resume sending out paper statements every five years to workers age 18 and over who are not receiving Social Security benefits and who have not registered for an online “my Social Security” account within three months of their birthday. Workers will receive an annual statement after age 60.

Online Social Security Calculators

This section repeats the information about your work credits, but then goes into detail about how much you need to earn for each credit. In 2014, you earned one credit for each $1,160 of wages or self-employment income. After the SSA has looked at your records and determined that you have earned the required number of credits to qualify for benefits, it begins estimating your monthly benefits based on your average annual earnings over your lifetime.

Because these are estimates, they tend to be more accurate as you get closer to retirement age. Still, it’s up to you to double-check their accuracy. You can use the SSA’s retirement calculator by going to socialsecurity.gov/estimator.

But you still won’t be able to get your actual benefit amount until you apply for benefits. Even then, your benefits package could be impacted by a number of other issues, such as where you worked. If you were in the military, worked for the railroad, or receive government pensions from state or federal employment, what you will receive could be impacted.

The Windfall Elimination Provision

Next you’ll see information on the Windfall Elimination Provision (WEP). Some of you either will be or already are receiving a pension from a job where you did not pay any Social Security taxes. These include jobs working for a state or local government, or for the federal government, as well as some nonprofit organizations and foreign jobs.

CAUTION

The Windfall Elimination Provision (WEP) reduces your Social Security benefits if you worked for an organization that did not withhold Social Security taxes.

In those cases, your benefits may be reduced by an amount dependent upon your earnings and the number of years you worked in jobs where you did pay Social Security taxes.

For example, Jane C. Owen, PhD, retired as a professor at Midwestern State University in Wichita Falls, Texas. She started taking her Social Security benefits at the age of 66. Her benefits were cut by almost 50 percent because she retired from a state position and it fell under the WEP. But she’s still pleased with this extra monthly deposit to her checking account, which makes a nice addition to her pension and savings.

There are some exemptions to WEP, including the following:

• If you are a federal employee hired after December 31, 1983
• If you worked for a nonprofit organization on December 31, 1983, that did not withhold Social Security taxes at first but then began doing so
• If your only pension is based on working for the railroad
• If the only work you did that did not collect Social Security taxes was before 1957
• If you have 30+ years of substantial earnings under Social Security
• If you are receiving survivor benefits

Government Pension Offset (GPO)

Then there’s the Government Pension Offset (GPO). If you get a pension from the federal, state, or local government where you did not pay Social Security taxes and you qualify for Social Security benefits as a current or former spouse or a widow or widower, you will probably be impacted by GPO. GPO means your Social Security benefits will be reduced by two thirds of your government pension. Please keep in mind that depending on how much your monthly pension amounts to, your Social Security could be eliminated entirely.

DEFINITION

The Government Pension Offset, or GPO, is a law that affects spouses, widows, or widowers who receive a pension from a federal, state, or local government but didn’t pay Social Security taxes. Those who fall into that category could see their Social Security benefits reduced by two thirds of their government pensions.

For example, if you receive a monthly pension of $600, two thirds, or $400, would be deducted from your Social Security benefits. Let’s say you would receive a $1,000 for a widow’s benefit from Social Security. If you received a government pension, you’ll only receive $600 a month from Social Security.

Ensuring Your Earnings Record Is Accurate

Would you believe the government occasionally makes mistakes? Of course it does, and this is true for the SSA. Mistakes are made every day. So when it comes to your earnings record, it’s up to you, your employer, and the SSA to ensure its accuracy.

The day you started working was the day the SSA began keeping records of everything you earned, or at least the reported earnings under your name and your Social Security number. New information is added annually because they update your record every time you and your employer report your earnings.

You need to look at your earnings record and make sure everything is correct. Keep in mind that some of the previous year’s earnings may not yet show on your statement because the SSA is still processing that year’s earnings.

How to Correct Errors

If you see any discrepancy in your earnings statement, call the SSA immediately. The number is 1-800-772-1213 and their hours of operation are between 7 A.M. and 7 P.M., Monday through Friday, local time. Remember they receive numerous inquiries, so you might have to wait to speak to someone. If possible, try to call early in the morning or later in the afternoon.

If you find an error, make sure you have your W-2 or your tax return for those years in question that confirms your claim that you had higher earnings than what your statement shows.

If you prefer to speak to someone in person about this, call your local SSA office and make an appointment. Or go to the office, and be prepared to wait an hour or two until someone is able to meet with you. Make sure you bring all the necessary documentation with you to substantiate your belief that you had higher earnings than what the statement reports.

The Least You Need to Know

• You should create an online account at “my Social Security” on ssa.gov so you can view your Social Security statement regularly to check its accuracy.
• Ensuring your earnings record is accurate is your responsibility. Take the time to go through the earnings record in your Social Security account with the information you have been compiling over the years.
• If you find a discrepancy between your official earnings record and your own calculations, assemble your W-2 earnings statements, W-9 forms, and tax returns before you call or visit your local Social Security office to dispute your earnings record.
• The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) can change the amount of benefits you earn.