Michelle Singletary: Redesigned Social Security statement makes it easier to see if you can afford to retire early

If you’re old enough and have long enough, you may recall getting an annual Social Security statement in the mail, about three months before your birthday, with estimations of your benefits.

But budget cuts put a stop to the mailings for most workers. Now, if you want to see your personal Social Security statement, you’ll have to create an online account. If you don’t have an account, or you have one but haven’t checked your statement lately, you should. The Social Security Administration has given the statement a makeover. It’s shorter – streamlined down to two pages from the previous four – and, thankfully, better written.

“I give them a lot of credit for trying to make this more user-friendly and trying to explain a variety of things like disability and survivor benefits,” said Joel Eskovitz, director of Social Security and Savings at AARP Public Policy Institute. “It’s a lot of information to convey and generally speaking, I think they’ve done a really good job.”

The most useful change to the statement is a color bar chart that shows the estimated monthly retirement payments you’d get each year starting at age 62 when you first become eligible. Previous statements just showed the monthly amount at 62, your full retirement age, and an estimate of what you’d receive by waiting until 70. The increases stop when you reach 70.

Eskovitz said the redesign helps clear up confusion about when to claim Social Security. Some people who claimed early believed that their benefits would increase once they reached their full retirement age.

If you claim your Social Security at 62, your monthly benefit drops significantly. And, except for cost of living adjustments, you lock yourself into the lower amount for the rest of your life. If you turn 62 this year and you claim Social Security, your benefit would be about 29.2% lower than if you wait until your full retirement age of 66 and 10 months, according to an example from SSA.

If you can delay claiming your benefit, the new year-by-year benefit amount illustration is a great reminder of why waiting may be worth it. Every year you delay beyond your full retirement age, up to age 70, you get an increase in your benefit. The percentage increase varies depending on when you were born. If you were born in 1943 or later, your benefit increases by 8% for each full year you delay receiving Social Security beyond your full retirement age.

The redesign includes fact sheets tailored with other information that people may have overlooked in the older, more densely written version. It also includes a summary of some things you should know:

• You need at least 10 years of work (40 credits) to qualify for retirement benefits.

• Your benefit amount is based on your highest 35 years of earnings.

• If you have fewer than 35 years of earnings, the years you don’t work count as 0 and may reduce your benefit amount. If you return to work your benefit could increase.

• If you are divorced and were married for 10 years, you may be able to claim benefits on your ex-spouse’s record.

Regularly reviewing your Social Security statement should be a key part of retirement planning. To set up an account, go to ssa.gov and look for the sign-in link for “my Social Security.” If you’ve placed a security freeze, fraud alert, or both on your credit report, you will not be able to open the account until you remove the freeze first. Social Security uses information in your credit file to verify your identity. Once you establish the account, you can freeze your credit report again.

About 63 million people have already created online Social Security accounts, according to SSA. But tens of millions more aren’t receiving the information that is critical to their retirement planning.

There’s bipartisan legislation – the Know Your Social Security Act – that would force Social Security to resume mailing annual earnings statements to the 180 million American workers between 25 and 60 who are paying into Social Security. Social Security still mails paper statements to workers 60 and older three months before their birthday if they don’t receive Social Security benefits and haven’t set up an online account.

“We’ve always contended that it’s still better to receive this through the mail, at least at certain ages, if they can’t do it annually as they used to,” Eskovitz said.

A Gallup poll earlier this year found many Americans may not be very realistic about the major source of retirement income. Workers expect that they’ll rely more on their savings and investments in a workplace retirement plan such as a 401(k). But in reality, retirees heavily rely on Social Security.

Fifty-seven percent of retired U.S. adults say they rely on Social Security as a major income source. Yet only 38% of non-retirees expect it to be a major source for them, according to Gallup.

Even with the financial challenges facing Social Security, it will still probably be a significant source of income in retirement for most workers. So, get your Social Security statement.

Make sure your earnings record is correct. Review the monthly retirement benefit estimate to help you in the decision to collect early or late.