Check Your Social Security Statements

Starting in 2000, the Social Security Administration (SSA) began mailing personalized statement annually to all workers age 25 or older who have worked in employment or self-employment covered by the Social Security system. These statements normally arrive about 3 months before a worker's birthday. Most people focus on the benefit estimate, because they are naturally interested in how much Social Security expects to pay them at retirement or if they become disabled or, if they die, how much their survivors can expect to receive. The statement also includes a record of the worker's lifetime earnings reported to Social Security, and that part of the statement is too often overlooked.

Every worker covered by Social Security pays Social Security taxes. These taxes are matched by the employer dollar-for-dollar. In fact, most American families pay more in Social Security taxes each year than they pay in Federal income taxes, partly because Social Security taxes apply to covered wages and salaries from the first dollar, without any deductions or exemptions. In return for paying these substantial taxes, workers are supposed to get credit for the appropriate amount of Social Security-covered earnings. Those earnings are used by SSA to compute any retirement, disability or survivors benefits to which workers and their families may become entitled. Most earnings reported to SSA are properly credited.

Unfortunately, some are not, for a variety of reasons. Incorrect reporting of the amount of earnings is relatively uncommon. Much more common is the failure to post any earnings for a year. Most such omissions are the fault of workers or employers, who must report all earnings to SSA on Form W-2. If an employer uses the incorrect Social Security number for an employee, then SSA cannot determine who should get credit for the earnings. Many workers have similar names. If a worker changes his or — much more commonly — her name without reporting the change to SSA, then the name and number will not match SSA's records, and the earnings will not be posted. Sometimes the government makes mistakes, too.

Check those statements. Mistakes and ommissions can result in reduced benefits. Mistakes can be caught and corrected. Complete omissions of earnings for a year can always be corrected, if the worker provides evidence of the correct figure. Be alert in your financial planning