A seemingly small, cost-saving, decision by the federal government could have a significant impact on those preparing for retirement and trying to calculate their Social Security benefits. This decision was documented in a recent article in a San Antonio newspaper. Here are excerpts from the article:
One of the most valuable pieces of mail from the federal government every year won’t be coming anymore.
It may not rank with an income-tax refund check, but the annual Social Security Statement arriving about three months before workers’ birthdays each year was a fabulous service. The statement was probably the single most important financial planning document most people ever received.
The Social Security Administration started mailing the statements in 1999 to everyone over the age of 25. The service was only 12 years old when the agency decided to cut costs by ending the automatic statements. As they say, the good die young.
The mailings stopped without advance notice. People with July birthdays and later won’t receive one this year. The agency stopped the statements despite not having them available online. It hopes to do so by the end of the year. Most people won’t bother to check anyway.
The Social Security website does have a retirement benefits estimator, but it does not have the range of information the yearly mailed statement contained.
The online estimator is a hassle. It’s not just entering your name and Social Security number. You must provide your mother’s maiden name, date of birth, place of birth and the previous year’s income. Most people wouldn’t know their previous year’s earnings, so they would have to look it up.
After all of that, the estimator provides only estimates of monthly retirement benefit amounts at age 62, 66 (67 for people born after 1960) and 70.
The mailed statement provided the benefit amounts, plus disability payment estimates and survivor benefits, if you died during the year. The mailed statement also contained earnings records, with incomes for every year of your career. If a mistake was made, you could correct it.
The Social Security Administration says that stopping the four-page statements will save the agency about $30 million in the current fiscal year and $60 million in 2012. Last year, the agency mailed statements to 152 million people. The mailed statements had been available by request since 1988, but the agency no longer takes requests.
The value of the statements to individuals goes beyond deciding whether to retire with early, full or delayed benefits. By seeing benefit amounts, individuals were reminded they will need other income sources in retirement. The statements were helpful nudges toward starting an individual retirement account or signing up for an employer-sponsored plan, such as a 401(k).
The Social Security Administration says it will consider mailing statements to people once they reach the age of 60. That will be too late for workers who should have started separate retirement accounts earlier in their career.
Retirement is now a matter of total individual responsibility. Everybody must plan their retirement income financially, and they also have to be persistent to dig up the information they need periodically to plan correctly.