When the Consumer Financial Protection Bureau released its Social Security planning tool in November, some took issue with the estimates it provided.

The tool allows users to enter their birthdate and highest annual income to estimate their monthly and annual Social Security benefits whe retiring at various ages. The Bureau’s Office for Older Americans worked with the Social Security Administration to develop and promote the tool, according to Richard Cordray, director of the CFPB, and the estimate is based on the current formulas used by SSA.

NAPA reported that in December, two senators, Richard Shelby, R-Ala., chairman of the Senate Banking, Housing and Urban Affairs Committee, and Mike Enzi, R-Wyo., chairman of the Senate Budget Committee, identified several problems with the way the tool calculates users’ retirement benefits.

One issue related to retroactive benefits was the result of a coding error and has since been corrected, but the senators were unsatisfied with the response to other issues.

The big issue for Shelby and Enzi was the difference in estimates for consumers who used both the CFPB tool and the SSA tool in their planning. Responding to concerns in February, Cordray acknowledged that the methodology used to design the tool would lead to differences in estimates, but felt they “did not undermine the intended purpose of the tool.”

CFPB’s tool uses the SSA Quick Calculator to estimate retirement benefits at a user’s full retirement age, and to generate its own estimates for other ages between 62 and 70. Those estimates are based on “standard actuarial increases and reductions in monthly benefits without making additional adjustments for working longer,” according to Cordray.

“This led to differences between the estimates shown in SSA’s Calculator and the Bureau’s tool for early and delayed benefits,” Cordray wrote.

SSA’s Quick Calculator does not take users’ earnings history into account; the Retirement Estimator does.

In a letter to the CFPB on March 9, Shelby and Enzi called Cordray’s response “inadequate and unresponsive.”

Estimates for retroactive benefits are still misleading, they said. “For users ages 62 through 65, the planner still computes annual benefits for the current year as the monthly amount multiplied by 12, regardless of the user’s actual birth month.”

Additionally, the CFPB tool applies delayed retirement credits to the current year, although the credits aren’t actually applied to a retiree’s benefits until the January of the following year.

Furthermore, “the CFPB planner always displays the wrong amount for users who choose any retirement age other than the full retirement age,” the senators charged. The SSA calculator assumes users remain employed until the year prior to retirement, but the CFPB planner adjusts estimates for age but not earnings, they said. “This method has the effect of displaying higher benefits for users who retire at 62 because they receive credit for wages earned from 62 through the user’s [full retirement age] and displaying lower benefits for consumers who retire at 70 because they are denied credits for wages earned from FRA through 69.”

The senators were also critical that the lifetime benefit estimate is based on a lifetime that ends at age 85.  

The CFPB has not responded to the most recent criticism.

— Read 4 Things You Need to Know About the Social Security Spousal Benefit on ThinkAdvisor.