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How Social Security Statements Help Retirement Planning

Older adults more accurately forecast future benefits when they get regular updates from SSA, new research finds

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Americans nearing retirement age significantly underestimate how much money they’ll collect from Social Security but make more accurate forecasts when they get personalized information on their prospective benefits via Social Security statements, according to a new study.

The March 2023 paper from the National Bureau of Economic Research (NBER) found that most people in their 50s and early 60s are on target in predicting the age they will claim Social Security but underestimate their future benefit income by 11.5 percent, or $1,896 a year, on average. A quarter of older adults are off by more than $5,100.

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However, “receiving one or more Social Security statements reduces the forecast error in annual Social Security income by $344,” according to the report, which is based on data from the Health and Retirement Study (HRS), a long-running University of Michigan survey of older adults. 

The NBER paper draws on Social Security–related survey responses collected from 1992 to 2018. During much of that period, the Social Security Administration (SSA) regularly mailed paper statements to tens of millions of U.S. workers with data about their future payments. 

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Those statements, which include information on individuals’ earnings histories and estimated benefits at various claiming ages, are now primarily available online to people who sign up for My Social Security accounts at the SSA website. AARP is supporting federal legislation to require the SSA to resume periodically sending paper statements to all workers ages 25 and up.

“People aren’t that great at anticipating their Social Security benefits, and information provision helps,” says Grant Seiter, a senior research associate at the American Enterprise Institute and the paper’s coauthor. “The Social Security statement does improve the accuracy of people’s estimates.”

‘Waves’ of data

Seiter says he and coauthor Sita Slavov, a public policy professor at George Mason University who specializes in the economics of aging, wanted to use the extensive HRS data to build on prior research on pre-retirees’ Social Security expectations. 

“Social Security is a huge source of retirement income for most Americans. Having an accurate estimate of the benefit is really important,” he says.

The HRS surveys a nationally representative sample of older adults every two years, allowing researchers to draw on “waves” of answers rather than a one-time snapshot, Seiter says. 

He and Slavov culled nearly 14,200 responses from 5,087 older adults about what they expected to get from Social Security at their anticipated claiming age and, once they filed, their actual benefit amount, and converted the figures to 2021 dollars.

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Seiter says the data shows that as people near retirement, “their Social Security expectations become more salient and more accurate.” 

The researchers also determined whether respondents would have received a Social Security statement around the time they were surveyed, based on how the SSA was doing mailings at the time, and found that the statements had “a statistically significant impact on reducing forecast error.”

Paper statements curtailed in 2010s

The SSA began sending out yearly paper statements in 1995, initially to people age 60 and older and expanding by the early 2000s to workers ages 25 and up. In 2010, the agency sent out more than 150 million statements, but the following year, the mailings were suspended for budgetary reasons, according to a 2020 SSA report

The mailings have since resumed, but on a very limited basis. Currently, anyone with a My Social Security account can view their statement online at any time, but hard copies are routinely sent only to people who have not created an online account, three months before their 60th birthday and annually thereafter until they file for benefits. (Workers at any age can request a paper statement by mail.)

The SSA says 64 million people have My Social Security accounts.

“There are benefits to the online statement. If I decided to log into my Social Security account right now, I could find estimates of what my likely benefits are,” Seiter says. “But you’re also potentially leaving some individuals out.”

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Bill would boost mailings

While AARP has long called for a resumption of annual mailed statements to most U.S. workers, it recently endorsed a bipartisan Senate proposal to mandate such mailings at five-year intervals for people ages 25 to 54 and more frequently for workers aged 55-plus, characterizing it as a step in the right direction.

“More regular statements as provided for in your bill and compared to current practice would help millions of Americans more effectively plan for retirement and better understand their stake in Social Security,” Bill Sweeney, AARP senior vice president for government affairs, wrote in a March 20 letter to the bill’s sponsors, Sens. Bill Cassidy (R-La.), Tim Kaine (D-Va.), Susan Collins (R-Maine) and Chris Coons (D-Del.). “They will have an increased understanding of their Social Security benefits and see any possible gaps in their current retirement planning.”

AARP is supporting another bill from the same group that would require the SSA to adopt new official terminology around three key Social Security claiming times: 

  • Age 62, the earliest you can get retirement benefits, but at a reduced level.

The bill would change SSA wording for these milestones from “early eligibility age,” “full retirement age” and “delayed retirement credits” to “minimum benefit age,” “standard benefit age” and “maximum benefit age.” A 2020 report from the Bipartisan Policy Center encouraged renaming the claiming ages, and resuming the large-scale mailing of paper statements, as ways to help people better understand the long-term ramifications of claiming decisions.

The new wording “would provide American workers with better and more understandable information about the impact claiming age has on their earned benefits and help them make more informed choices about when to start collecting Social Security,” Sweeney writes in a separate letter to the sponsors.

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