It’s been about four years since the Social Security Administration rolled out a new style of benefit statement intended to help people estimate their benefits at different claiming ages, and while the forms are useful in some contexts, they also are proving to have some serious shortcomings when it comes to more nuanced retirement income planning.
In fact, in the assessment of the retirement researcher Derek Tharp, the current forms are “almost completely useless” when it comes to generating high-confidence income projections.
The reason: Early career earnings get condensed into 10-year bins, Tharp explained in a LinkedIn post and subsequent comments shared with ThinkAdvisor via email, thereby destroying the utility of the report in two key ways.
“First, you can't use the 10-year bins to actually calculate someone’s benefit,” Tharp wrote. “If someone’s plans for retirement don’t match the SSA’s assumptions for calculating their benefit on page 1 of the report, [their benefit] could end up looking wildly different. This also applies to more complex projections for spousal, survivor or disability benefits.”
To have truly accurate projections, Tharp said, one needs earnings from each individual year.
“Second, it makes it effectively impossible to assess the accuracy of one’s earnings history with the SSA,” Tharp warned. “Who knows how much they earned over 10-year windows? Older earnings are the most likely to have been reported incorrectly, and a common error is they see $0 for a given year when someone did have covered earnings — but this obfuscates that type of error and makes it hard to detect.”
Does Online Self-Service Help?
The good news is that the SSA’s website provides much better information for those who are technically savvy enough to take full advantage of what it has to offer. Yet, this in itself is something of a problem, according to Tharp, as many people who are approaching retirement can struggle to access and utilize the website.
“The old version of the mailed statements gave you a full earnings history with everything you need to both assess the historical accuracy of your earnings history and do any custom calculations of your benefit that you’d like,” Tharp said. “[Now], the SSA sends folks to their website for their full earnings history.”
Notably, the SSA’s website enjoys a mostly positive reputation among the retirement income planning community. However, as Tharp and various commenters on the LinkedIn post agreed, there is still “a fair share of folks” who struggle accessing the website for a number of reasons.
“Even once they have access, they may struggle with exporting and sharing their earnings history,” Tharp said. “It’s not a statistic anyone will have readily available, but I do wonder how many collective hours have been wasted just trying to track this information down since the statement change went into effect.
If he puts on his “cynical hat,” Tharp said, he also wonders if this “waste” is actually a feature for the SSA and not a bug.
“The harder they make it for people to access their earnings histories, the harder they make it for people to maximize their benefits,” Tharp said. “They’ll never come out and say this, of course, but the SSA certainly does not benefit from people maximizing their benefit and putting additional strain on the system.”
ID Verification Can Also Be Tricky
To give credit where credit is due, Tharp emphasized, the issue with the SSA website isn’t that the website itself is particularly hard to use.
“In fact, I think it’s a pretty well-designed website,” he explained. “Sometimes logging in and getting an account set up can be a barrier, but once you are in it's pretty good. … But logging in itself is something I’ve had many clients run into issues with.”
One relatively common occurrence is to see people struggle with ID verification through ID.me, the single sign-on provider that meets the U.S. government’s online identity proof and authentication requirements.
“Maybe they've struggled with ID verification through ID.me, or maybe they set up an account awhile ago and can’t remember their credentials,” Tharp said. “Maybe they don’t actually have an email address, cell phone and everything else needed to set up an account and log in with two-factor authentication. I’m not 100% sure if two-factor is required, but I know it steers you that way and I have clients that get hung up on that.”
While uncommon, Tharp said, he continues to meet people who don’t own a computer or cell phone and have no desire to own one.
“That presents a whole different issue,” he said.
Credit: Chris Nicholls/ALM
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