#106 - Understanding Your Social Security Statement and What It Really Means

Eric Blake: Welcome to another episode of the Simply Retirement Podcast, where we want to educate and empower women to live your retirement on your terms. I'm your host, Eric Blake, practicing retirement planner for over 25 years, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.

Joining me once again is Wendy McConnell. Wendy, how are you?

Wendy McConnell: I'm good. How you doing?

Eric Blake: Good. So I got a quick question before we get to our main topic.

Wendy McConnell: I love when you surprise me with questions.

Eric Blake: Is there anything better or worse than home improvements?

Wendy McConnell: Uh, it depends on if you have somebody that knows how to do them. No.

Eric Blake: Not me doing it. I don't... No, that's always worse. That's always the worst part.

Wendy McConnell: Okay. Yeah.

Eric Blake: I'm talking about when you have somebody coming in. So we're having our kitchen cabinets repainted, and it's always the anticipation of what it's going to look like when it's all done, and the excitement about that.

But all the other stuff of you've got to have everything covered and moved out and move stuff. You can't be in there. All the crazy stuff that goes along with it.

Wendy McConnell: How long does it take?

Eric Blake: It's only a couple of days, but it's our kitchen, so we use our kitchen quite a bit.

Wendy McConnell: Well, I don't know. Maybe you should work on that, not use it as much.

Eric Blake: Not using the kitchen? Yeah.

Wendy McConnell: I don't know.

Eric Blake: I don't know if I can follow that advice.

Wendy McConnell: You know.

Eric Blake: Okay. Well, on to today's topic.

Today's topic was actually inspired by a listener question, and we're going to use that question to walk through how to read and use your Social Security statement. Also, why it's so important to understand what it's really telling you.

By the end of the episode, I hope you have a clear understanding of what your statement is showing you, what assumptions are built into those numbers, and how to think about your Social Security decision with a little bit more confidence.

And of course, for all the links and resources shared in the episode, you can visit thesimplyretirementpodcast.com.

And don't forget, if you have a question, a topic idea, or a specific retirement challenge you would like to hear covered on an upcoming episode, you can visit thesimplyretirementpodcast.com/askeric.

All right. So just starting with the basics.

The first thing is, when you get your Social Security statement, I think it's one of those things that is really important, of course, from a planning perspective, but it's also misunderstood a lot of times.

Because when you look at your statement, most people just go straight to the numbers.

What's my benefit going to be at a certain age?

And of course, that is important.

The key ages are going to be your benefit at age 62. That's the earliest you can file for a retirement benefit.

It's also important to know what your full retirement age benefit is, and also your benefit at age 70.

Wendy McConnell: Okay.

Eric Blake: But it's also important to understand that there's much more to your statement than that.

Because number one, it's going to tell you if you are in fact eligible for retirement benefits, and that means you've worked for 10 years, 40 credits.

That's the first thing you want to look at.

But it also tells you whether or not you would be eligible or would have enough credits for disability benefits if something happens before retirement.

And it's also going to tell you whether or not your survivor, your family, might be eligible for survivor benefits if something were to happen, an early death unfortunately.

That's also something you want to be aware of.

And it also is going to tell you whether or not you're eligible for Medicare by the time you turn 65, if you've earned enough credits for Medicare as well.

That's also going to be on your statement.

Wendy McConnell: Okay. So where is this statement? We have to look it up?

Eric Blake: So the easiest thing, of course, is go to ssa.gov.

They used to mail these out, and they still mail them out, but only if you are age 60 or above and you have not actually set up an online account.

That's the only time you actually get it mailed now.

Wendy McConnell: Since I have an online account, are they going to send me something or no?

Eric Blake: No. Everything's going to be online.

Wendy McConnell: Okay.

Eric Blake: And we're going to talk about why that's so important to have online access in a little bit, and why you want to check it on a regular basis.

So usually, as most people know, they used to mail those out about three months before your birthday once you turned age 60, and you could review it and see things.

Even the statement itself has changed since those days.

But that's really, again, making sure that we have a process, and I'm going to share why you want to check that on a regular basis here in just a bit.

Again, it's not just about that one decision about, okay, what happens when I retire, but it's also giving you a little bit bigger picture of what your benefits are over time.

Now here's the key. These estimates, the numbers you see, there are certain assumptions that are built into those, and the one big assumption that you want to know about is that it assumes you're going to keep working at a similar level, earning the same amount, until you actually claim benefits.

So when you're looking at your statement and you say, "Well, I pulled it as of 2025. Here's what my earnings were in 2025," the estimated benefit you're going to see is going to be based on the assumption that you continue earning that same exact amount up until the point you actually claim benefits.

Wendy McConnell: Okay. So if you make more money, it's going to increase. If you stop working altogether, it's going to decrease?

Eric Blake: It depends, and that's where we start looking at some of the other factors that you want to be aware of as far as benefit eligibility and what your benefit is based off of.

Because when you start thinking about how your benefit is calculated, it's going to be based on your highest 35 years of earnings.

So if you've already got 35 strong years, those are the ones that are going to be used.

If you continue to work and you are earning about the same amount, there may not be a big impact. It may be about the same, so you can have a pretty good estimate of what that's going to look like.

But if you have fewer than 35 years, the system actually fills those in with zeros.

Wendy McConnell: Okay.

Eric Blake: And so back to your question of if I stop working, if I keep working longer, the impact of those is going to be based on what your actual work history is.

That's where it becomes important to review your statement to see, what does my earnings history look like, and what would be the impact of either my decision to stop working or to continue working, potentially even into retirement eligibility.

Wendy McConnell: Okay.

Eric Blake: Now, the other thing your statement shows you is, again, what would happen if you keep working and earning the same amount.

And again, one of the things that I think is important is understanding that if your intent is...

And again, it all comes down to planning, and that's why this tool can be so valuable, thinking about what is my plan? When do I want to retire? And then how does Social Security fit into that picture?

And thinking about, if we're talking to women as our audience, one of the things you obviously have to be aware of is, what does your work history look like?

Do you have gaps?

Did you have to take time out of the workforce early on to provide care for kids?

Do you think you may have to take time out of the workforce later on to take care of parents?

Or are you going to have a full 35 years?

Again, so many more women now have a full work history, but that's not the final decision.

It's again, what was my earnings history in the past?

And one of the tricky things to me that the Social Security statement now does is, for those first couple of decades of your working history, they've really combined them all together.

So you see decades worth of income amounts all added up.

Where that becomes tricky from a planning standpoint is saying, "Well, if I need to know if I've got 35 years or not, I have to dig a little bit deeper in my online account to see what my actual year by year earnings history is."

Because if you wanted to see, "Well, what would happen? What are my what ifs? What if I continue to work? What if I retire early?" You really have to know what your earnings history is to know what that impact could be.

Wendy McConnell: Got it.

Eric Blake: So beyond just looking at, okay, if I'm going to choose to delay my benefit to age 70 to maximize my delayed retirement credits, it's what is the impact going to have if I continue to work or if I retire early?

So it's not simply just based on waiting. It's looking at all these other factors, which actually kind of leads us to the question that we received.

This was actually a question from Wayne. He was okay with us sharing his name.

So the question was:

"I'll be 67 years old in November 2026. I have not started receiving Social Security benefits yet. I understand that the Social Security estimates they mail out or that are online assume that I'm still working until I start receiving benefits.

My corporate job ended August of 2024, and I haven't had W-2 income since then.

So the question is, will my benefits continue to increase roughly 8% yearly on the chart estimates as I wait until or beyond full retirement age, or are they nearly frozen since I'm no longer paying into Social Security?"

Wendy McConnell: Hmm. Good question.

Eric Blake: Absolutely.

And so that's getting back to what the Social Security statement is actually telling you.

It assumes that you continue earning that amount that is in your most recent year on the report.

So in his case, if he's got a zero, it's going to basically assume that he's got zeros up until the point that he's going to file.

So if his benefit is based on that, most likely he may not be impacted that much, so his estimate may actually be pretty accurate.

Wendy McConnell: But the zeros, don't they take the highest amount of earnings? Wouldn't the zeros go to the bottom? Was it 35 years of working?

Eric Blake: Right. So it's your highest 35 years.

Wendy McConnell: Right. So that's what I'm saying. These zeros, wouldn't they drop to the bottom, almost like a cancel each other out type of thing? Because the years that he was working are going to be used first.

Eric Blake: Right. So that's what you're basically looking at, saying, okay, if he's already got 35 years, those zeros really don't matter.

Wendy McConnell: Okay.

Eric Blake: Right. If he didn't, if he has 30 years and he's adding zeros, that might impact it. That might reduce his benefit.

His actual benefit may be less than what his statement is showing him, and that's really the key that we're trying to get at, what is the statement showing you, and what might be the reality based on your specific circumstances?

So if, for example, we also have people that earn different amounts throughout their lifetime.

If for the first 20 years of your lifetime you were earning a smaller salary, then all of a sudden you got, I don't know, a sales job making a lot more money, that's where you have to make the decision.

If I'm able to continue earning that higher amount and I'm replacing those earlier years, how big of an impact is that going to have?

Again, that's where the statement can be a little bit misleading based on your specific situation.

And that's really where the planning aspect comes into play of saying, "Okay, what is my statement showing me? What is the reality of my situation? What do I think is going to happen over the next few years before I actually file for benefits?"

Again, this is all assuming you're kind of in that retirement timeframe as well.

Wendy McConnell: Right. So do you know if Wayne had 35 years in?

Eric Blake: From what, at least from the question as it was phrased, I believe that would be the case. It looks like he does have the 35 years.

So his question is really saying, "Okay, if I just have zeros, is my benefit going to get reduced?" That's my interpretation of the question.

Wendy McConnell: Okay.

Eric Blake: So if he has the full 35 years, the reality is his benefit probably is pretty accurate. It may not change a whole lot.

Now here's, again, for planning purposes though, and he does actually give us an age.

Let me scroll back up. Yeah, he did.

He'll be 67 in November 2026, so later this year.

Most likely his benefit is not going to change much from what the statement shows.

Depending on when he files, if he's going to file for full retirement age benefits, it's probably pretty close.

Where the statement falls short just a little bit is it doesn't make any assumption around future cost of living adjustments.

So when he's looking at his statement, all historical cost of living adjustments are going to be included, but it's not going to give you any future cost of living adjustment assumptions.

Meaning, if his benefit at age 67 is $3,000 a month, it's going to increase by about 8% per year for the next three years until he turns age 70, which would be his maximum benefit.

But it might be a little bit higher if we get cost of living adjustments, which we most certainly will, but we don't necessarily know what those adjustments are going to be.

So if his intent is to wait until 70 to maximize his benefit, it might actually turn out to be a little higher than what the current statement estimate shows at the time he files.

Hi everyone, it's Eric. Hope you're enjoying today's episode.

I want to take just a quick moment to share a resource I think you'll find really valuable.

If you've ever asked yourself, "How much is my Social Security reduced if I file early?" or "Am I eligible for benefits as a spouse, surviving spouse, or even after divorce?" you're not alone.

That's why we created our Ultimate Guide to Women's Social Security Success.

It includes six of our most popular Social Security guides and checklists for women.

Inside, you'll find a 2026 quick reference guide with key Social Security amounts and limits to be aware of, along with five additional guides and checklists to help you make more informed decisions about eligibility and filing strategies.

You can download it for free at womenssocialsecurityguide.com.

Keep it handy wherever you may be in the decision making process.

Now back to the episode.

Wendy McConnell: Let me ask a different question, all completely out of the blue, because you know how I like to do that.

Eric Blake: Oh good. Yeah.

Wendy McConnell: I love these.

Wendy McConnell: So if you take your benefit, say at retirement age, 67, instead of waiting until 70, does the theory even out because you're taking three years of benefits?

You're getting the increases if you wait until 70, but on the flip side, you're getting money for three years before that.

Eric Blake: So that's really where, from a planning perspective, you've got to dig a little bit deeper.

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So when you're using your statement and you think about, okay, how can I make better decisions using the information that my statement is showing me, now we get into what happens if I claim at 62 versus 67 versus 70.

That's where we start looking at what are my cash flow needs. Also, what is my longevity? What's my family history look like?

If I'm expecting to live into my 90s, that makes a significant difference versus saying, "Okay, what if I'm only going to be in my mid-70s?"

So to answer your question, that's where we have to start looking at those break-even analyses, assuming you've got other resources.

Actually, the break-even analysis doesn't do a whole lot of good if that's the only income source you have. It does, other than it might help you decide that you've just got to continue working.

So it's still talking about income sources, but it's the difference between saying, "Okay, do I have to continue working to age 70 in order to maximize my benefit, or do I have other resources, IRA accounts, investment accounts, that could fill that gap until I turn 70 and then start my benefits?"

Wendy McConnell: Oh, okay. Yeah, that makes the most sense.

Eric Blake: And then when you talk about the longevity factor, and again, I always talk about it from the wife's or the woman's perspective in terms of when you're making those decisions.

Obviously, it also varies as to whether we're talking about a single individual versus joint, and the impact of delaying your benefit on the survivor benefit.

Who's going to live longer?

So when we're talking about longevity, if we're talking about a married couple, we've got to factor in both spouses and the statistical likelihood that the wife is going to live longer.

That decision to say, "Well, if I'm going to start early versus delaying," in my opinion at least, you've got to factor that survivor benefit component into it as well.

Wendy McConnell: Exactly. Yeah.

Eric Blake: Typically, the break-even, I think this may be where you were going with this, depending on how early versus how late you start, is somewhere between the late 70s to early 80s.

So 62 versus 70, or 67 versus 70, usually it's around 78 to 82 where that break-even falls.

Meaning that's the point where, once you've hit that age, delaying will now provide a higher lifetime benefit to you.

Wendy McConnell: Okay. Yeah. Right.

I was like, "78? What are you talking about?" But I'm up to speed now.

Eric Blake: Right. So when I say break-even, it's what's the point where having delayed my benefits now provides a higher lifetime benefit.

Wendy McConnell: Okay. I got you.

Eric Blake: And of course, the decision of saying, okay, unfortunately we make a lot of decisions based on the urgency of the scenario.

"Hey, I lost my job. I'm 63. I don't have any other source of income. I've got to start Social Security."

That's a whole different conversation versus, "Well, how long am I going to live?"

It's, "I've got to pay my bills. I've got to do something."

That's really where the individualized decisions have to come into play.

But if you do have the flexibility to say, "Okay, well I have the option to wait," what do I need to do around that?

How do I complement my Social Security decision based on my other income sources?

Do I have to work?

Do I have investment assets, retirement assets?

Do I have a pension?

What are my other resources that might allow me to delay the benefit?

Wendy McConnell: Yeah.

Eric Blake: Ultimately, I think it's also about thinking about this longevity issue.

You just have to understand that the decisions you're making in your 60s will impact your income, your lifestyle, potentially your flexibility, everything in your 70s and 80s, and even potentially in your 90s.

So as best you can, you still have to take that into consideration.

Because making the decision to say, "Well, at 62, I don't know how much time I've got, I'm just going to start benefits," well, when you're 85 years old, you might regret that decision.

Wendy McConnell: Yeah. And you know, that's hard to figure.

You don't have a crystal ball.

My one grandmother died in her 60s. My other one lived to 99.

Eric Blake: And it really is very much just an educated guess.

But we have to do something.

You can't say, "Well, everybody just starts at 62," and we go from there.

Now again, we don't have to necessarily go into all the other potential issues that face us down the road around Social Security.

We just did an episode on the future of Social Security.

Those are factors that have to be considered as well in terms of saying, "Okay, what do I think might happen?"

You still have to make some reasonable assumptions based on your circumstances.

If you want to factor in what might happen with Social Security down the road, that's okay.

As I shared in that episode, if you said, "Okay, I just want to take the most conservative approach," assume about a 20% reduction in what your statement tells you now.

Use that for planning purposes.

Wendy McConnell: Got it.

Eric Blake: So there are a lot of factors. We just have to make our best educated guess and hope it works out.

Wendy McConnell: Yeah. And if you play pickleball, you're probably going to live a little bit longer. I'm just saying.

Eric Blake: I've seen those stats too, that playing racket sports increases longevity. I've seen that.

Wendy McConnell: Is that true?

Eric Blake: It is, yes. You've got to look that one up.

Wendy McConnell: All right.

Eric Blake: I will. That'll give you another reason to say, "Where are you going?"

"I'm going to play pickleball because I want to live longer."

Wendy McConnell: It's another way to convince my husband to start playing.

Eric Blake: Exactly. There you go.

Yeah, it all comes back to pickleball.

Now before we wrap up, I do want to talk about, again, you brought it up earlier as far as getting the statement. Do you get it by mail? Do you need to set up an online account?

I want to make sure we go through this because it's important not only for reviewing your record, but protecting your record.

Again, the best way to do that is to actually set up your account through ssa.gov.

They've got the new ID.me and login options to set up your online account.

What it does is give you access to your full earnings history so you can actually see year by year if that's important for you.

If you've got those zeros in there or lower income years, you can actually see those details.

That could be important if you're using some of the calculators out there to say, "What would happen if I stopped working earlier? What would happen if I decided to work longer? What would happen if I earned more money?"

To see what the implications might be from a planning perspective.

But what I typically encourage is to review it at least once a year.

Not just the estimates, but also your year by year earnings.

Not just because of, okay, what's my future benefit going to look like, but to make sure it's right, to make sure it's accurate.

I've heard way too many stories of, "Hey, I didn't look at this and I'm getting ready to file for benefits, and I look back at my earnings history and I'm missing years."

Wendy McConnell: Oh, okay.

Eric Blake: Right?

And that does happen. It happens more often than you might realize.

Especially if you're self employed, there may be issues there because it's not your employer that's filing the payroll tax returns.

But I've seen many situations where somebody says, "Hey, my benefit got impacted because I lost some years in there and I don't really know what happened, and I didn't review my records, so I don't know how to fix it."

There is actually a timeframe that you have.

In general, you have about three years.

The exact timeframe, and where this comes from I do not know, so don't ask that question, is three years, three months, and 15 days from the year the income was earned.

Wendy McConnell: That's the only amount of time you have to question whether it's right or wrong?

Eric Blake: In general, that's the timeframe.

Now if you've got hard proof, what I would call hard proof, a W-2, a tax return, something that shows you had earnings, if it was 5 years, 10 years, 15 years ago, in many cases they can still make that adjustment.

But you have to have that proof.

And then that becomes the challenge.

Some people keep their tax returns forever. Some people, after a handful of years, they get rid of them.

Wendy McConnell: Seven years, they say. Seven years. I always hear seven years.

Eric Blake: Seven years is typically the magic number, but again, this might be a reason why, hey, I need to rethink that.

Wendy McConnell: Yeah. Just what I need, to save more paper. One more thing to worry about.

Eric Blake: But it's also important that you review your Social Security statement to verify the numbers are right and what's on there is accurate, so that by the time you're ready to file for benefits, you're getting what you deserve.

But it's also important in terms of protecting yourself from identity theft.

Again, same situation. There are a number of stories out there where people say, "Hey, I didn't realize somebody had actually stolen my identity and had applied for Social Security benefits."

So that happens as well.

If something looks off, you just want to make sure you're taking action, and obviously you'd want to do it sooner rather than later.

Wendy McConnell: Yeah.

Eric Blake: And just one final point there.

If you want a more accurate estimate on your Social Security benefit, especially if you're no longer working, it's important to make sure your earnings history is right.

It becomes that much more important, especially if you start thinking beyond the estimate that the statement shows you and making better decisions around the information on your statement.

Because if you're saying, "Okay, if I had years out of the workforce, if I intend to work, maybe later into the workforce," all these things can have an impact.

The other part to that is saying, "Okay, if I continue to work, even if I've started Social Security benefits, I can actually increase my benefit if I have zero or low income years in the past."

So I could apply for benefits and continue working.

Again, as long as you're over full retirement age, you won't have to worry about the earnings test.

But I can actually be working, receiving Social Security, and still increase my benefit by more than just the standard cost of living adjustments and delayed credits, depending on the circumstances, by continuing to earn and replacing zero or low income years.

Wendy McConnell: Okay.

Eric Blake: So just a few key takeaways before we wrap everything up.

To keep it simple, your Social Security statement is based on specific assumptions.

We've talked about what those assumptions are.

It's going to be based on your highest 35 years of earnings.

It's also going to assume your future benefit is based on your most recent earning year and the assumption that you're going to continue earning that amount.

Delaying benefits obviously increases your income in the future, even if you're not working.

Reviewing your record helps make sure everything is accurate and that you're not subject to a scam of any type.

Anything else, any other thoughts or questions as far as understanding your statement before we completely wrap this thing up?

Wendy McConnell: No. I'm good.

Eric Blake: Awesome.

The statement is something everybody kind of takes for granted.

People just look at the what, okay, what does this show me? What's my income? What's my future benefit?

But use the statement as a planning tool because it can help you make much better decisions in the future, or make decisions on whether I should or should not continue working in order to improve that benefit.

As always, thank you for tuning in.

Thank you, Wendy, for joining me once again.

If today's episode helped you better understand your Social Security statement, the next step is making sure those decisions fit into your overall retirement plan.

If you'd like help thinking through your options, including when to claim and how Social Security fits into your overall income strategy, you can learn more about our process at getmysimplyretirementroadmap.com.

That's it for today's episode.

For all the links and resources mentioned today, you can visit thesimplyretirementpodcast.com.

Don't forget to like, follow, and share the show.

Until next time, please remember, retirement is not the end of the road, it's the start of a new journey.