94% of Americans have zero idea what their social security estimates are… are you one of them?

May 19, 2014 12:00 am

Derek M. Amey

Partner & Co-CIO

94%. NINETY-FOUR PERCENT!! Pardon the exclamation points and the capitalization, but the number is so staggering it deserves them. If I had a way to make it flash in bright yellow neon letters to show how mind boggling it is, I would. That number represents the amount of American workers who, since April of 2011, have zero idea what their social security estimates are. How do I know this? The answer is very simple.

Social Security Administration Makes Changes
Prior to April 2011, the Social Security administration would mail annual statements to every working American. Most of us should remember receiving the green statement in the mail confirming your work income history, and the benefits you could expect to receive based on a variety of different scenarios. After April 2011, the Social Security Administration (SSA) suspended mailing these annual statements in an effort to cut costs, and we were all encouraged to register online at http://ssa.gov/myaccount/ to view our earnings record and our estimated benefits directly.  6% of working Americans (or approximately 10 Million folks) have actually signed up— only 94% more to go. Speaking from experience, the sign-up process is fairly painless and takes just a few minutes to complete.

Now I’m not blind to the fact that for many workers (including myself), retirement is so far off in the distance that there’s little immediate value in knowing what your estimated benefits may be in 20+ years. Certainly a large percentage of the Generation X&Y workers barely remember receiving the statements in the first place, let alone understand what they were or how they affect their retirement. I know I’ll be called an overachiever, but I still review my report (online, mind you!) annually to ensure that my earnings record is accurate. Short of changes to the Social Security system (which is a much deeper discussion left for another time), a worker’s earnings history will be used to determine their benefit amount.

Baby Boomers, what’s your excuse?
It’s estimated that 10,000 baby boomers retire in America every day. This trend started in 2010, and is expected to continue for the next 19 years. It’s troubling, but for many of these folks, due to a lack of savings, their Social Security benefits will be their only source of income in retirement. According to some estimates, the Baby Boomer generation represents over 30% of the American Population. Let’s assume for a moment that the 6% who have already signed up for online access to their benefit statement are all Baby Boomers. Even then, there are still millions of Americans in the dark about what their estimates might be. Far too many of the baby boomers are marching towards retirement without current information or perhaps any idea what the potential effects are from taking retiring early, working longer etc.

Their lack of information of their own financial situation is made even more surprising because many polls taken in recent years find that a large percentage of Americans are concerned that they will not have enough savings to retire. Obviously one cannot begin to think about their finances in retirement without current information. Reasons for the low participation can be debated and there are many theories, but the SSA has grown so troubled by the numbers that changes are coming shortly. I suspect for many it’s a case of defeatism, whereby they feel there’s little they can do to change the outcome so they would rather be in the dark about their current situation than face the reality.

Listen up Americans, your malaise is being rewarded! A change is coming!
According to recent reports, starting this fall the SSA will resume mailing physical statements to millions of Americans.  To try and keep costs down, workers will not receive a report every year. Instead, statements will be mailed every 5 years starting at age 25. If you are one of the folks who has yet to register online, statements will be mailed to you the year you turn 25, 30, 35, 40, 45, 50, 55 and the final statement the year you turn 60. Currently those of us who registered online will not receive paper statements, although there are some folks lobbying for that to change as well.
If you or a loved one is close to retiring or serious about determining if you can afford to retire, we strongly suggest signing up. The 5 year interval between statements is probably fine for those of us under the age of 50. However, for those of you over 50 and for whom retirement is not too far in the future, having current and accurate statements from the SSA are a necessity. If retirement for many of us is 20+ years, can you really afford to not take 10-15 minutes out of your day and sign up? Visit  http://ssa.gov/myaccount/ for more information.

Derek Amey serves as Managing Director and Portfolio Manager at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail him at damey@strategicpoint.com.

The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Derek’s opinions and comments expressed on this site are his own and may not accurately reflect those of the firm. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.