Dear Rusty: Can or does the Social Security Administration occasionally make mistakes in determining the benefits due? I’m now 72 but I retired early at age 61 and knew that my benefits would be reduced. I’ve always wondered if my monthly benefit calculation was incorrect but did not know how to address my concerns. If it is possible, could you direct me in how to handle with the SS Administration? Signed: Skeptical of My Benefit
Dear Skeptical: Can the Social Security Administration ever make mistakes? Of course they can, and do, but not really very often considering that they are dealing with tens of millions of beneficiaries, and especially when it comes to computing benefit amounts. Since nearly all benefit computations are done by computer, the usual source of any error is almost always from using incorrect input data. The actual benefit computation formula, while complex, is very standard and well proven; if an error occurs in a basic benefit computation, it is usually because a person’s lifetime earnings record contains an error. Having said that, let’s explore why you feel your benefit may not be correct.
When you say you “retired early at age 61” I assume that means you claimed your Social Security early at age 62 (the minimum age). Since your full retirement age is age 66, that means that by claiming at age 62 your benefit was cut by 25% from what it would have been at age 66. Also, any benefit estimate you had from Social Security prior to claiming made the assumption that you would continue to earn at your current level until you reached your full retirement age. If you “retired” and stopped working and earning at age 61, the benefit you are entitled to is less than that estimate you had from Social Security at age 61.
So, how can you address your concerns? I suggest the first thing you do is get a copy of your lifetime earnings record from Social Security. You can do this by calling them and requesting it or, if you have a “My Social Security” personal account, you can obtain it online. You should verify that all of your lifetime earnings are properly reflected in Social Security’s records (SS gets your earnings data from the IRS). Note that only your earnings up to the maximum payroll tax for each year count because that’s all you paid SS FICA tax on; if your actual earnings in any year were more than the annual payroll tax cap, only the amount up to that year’s tax cap is used. Be aware that if you find an error, you will need to prove it to Social Security by showing them a copy of your W-2 or your Federal Income tax return for the year(s) in question. If your lifetime earnings record is in order, then you are almost certainly getting the correct benefit. When computing your benefit, Social Security adjusts each year of your lifetime earnings to today’s dollar value, so inflation shouldn’t be a factor either. The highest earning 35 years over your lifetime (adjusted for inflation) are used to determine your benefit amount.
If you’re still uncomfortable that you may not be getting the correct benefit, you should call Social Security directly and ask them to review your benefits to make sure you are receiving the correct amount. Social Security has all of your lifetime earnings data immediately available and can quickly determine if your benefit amount is correct based upon the earnings history shown in your record.
By Russell Gloor • Certified Social Security Advisor