Your Social Security Statement

This is part two of a series on Social Security. This series is based on information from the Social Security Administration and reviewed by Robert Simons from the Escanaba Social Security office.

Each year — about three months prior to your birthday — you should receive a Social Security statement at your home address (the address listed on your previous year’s tax return). The Social Security Administration is required by law to provide these statements to all workers 25 and older who are not already receiving monthly Social Security benefits.

This four-page document lists your estimates of retirement, survivor and disability benefits. It’s also an easy way to ensure your earnings or self-employment income is accurately posted. It’s very important to check your earnings for accuracy since your eventual benefits are based on your lifetime earnings.

Confirming your numbers are accurate is particularly important if you’ve worked for an operation that’s no longer in business due to bankruptcy. It’s not uncommon for an employee to have a year of missed earnings from a bankrupt operation.

In such a case, you need to provide your original W-2 from that year to ensure you are credited for those missing earnings, even though the company is no longer in business. Not all bankrupt operations fail to report earnings, but some do fail to pay all their FICA taxes.

Social Security uses your entire earnings record to determine your benefits. For full retirement-age workers, this is the formula:

First, your wages are indexed to current wage standards. Your 1975 earnings, for example, are probably considerably less than your income today. After indexing, they become much closer than you would think.

Then, the highest 40 years of an individual’s earnings are determined. Then the five lowest years of earnings are eliminated, leaving the highest 35 years to determine an individual’s level of benefits. This is divided by the number of months, to result in the average indexed monthly earnings.

Finally, this figure is applied to the formula specified by Congress to determine the monthly benefit amount, taking into account your age at retirement.

Upon receiving your Social Security statement, you and your spouse should review the benefits on your record. It isn’t uncommon for a married couple that has worked together in a family farm operation to file all the self-employment income under the husband’s Social Security number as a way to reduce tax obligations.

In such a case, the wife has worked for the farm business but was never paid a salary, leaving her with no earnings posted to her Social Security number. Without an earnings record, she’s ineligible for Social Security benefits based on her own earnings record, and she may only be eligible for widow’s benefits if the husband dies or spouse’s benefits when they both reach retirement age.

If a tragedy strikes, such as death or disability, your spouse needs to be aware of the family’s eligibility for Social Security benefits. The Social Security statements provide this information.

The next part of this series will discuss retirement income from Social Security. For more information, log on to or contact your local Social Security office.

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