Your annual earnings determine the amount you will receive from Social Security in retirement. But incorrect or omitted earnings could cause you to miss out on thousands of dollars in retirement benefits. It’s up to individual employees to spot mistakes and take action to correct them. Here’s how to find and fix Social Security errors.
Check your Social Security statement. The Social Security Administration no longer mails paper Social Security statements to anyone under age 60. But workers who are age 18 or older can view their statement online by creating a my Social Security account. Your Social Security statement will list your earnings that were taxed by Social Security for each year of your career. You can check these earnings against your tax returns or W-2 forms to make sure they were recorded correctly. “I recommend people check their Social Security statement each year as part of their annual financial checkup,” says Dana Anspach, a certified financial planner and CEO of Sensible Money in Scottsdale, Arizona.
[Read: 6 Social Security Calculators That Can Help You Decide When to Claim.]
Wait for your statement to be updated. It may take a year or two for earnings to be included on your Social Security statement. If the incorrect earnings are for this year or last year, your record may not have been updated yet and the issue may resolve itself. “It takes a while for everything to make its way through the system, so there’s no need to worry if your earnings from last year aren’t showing up yet,” says Mike Piper, a certified public accountant and author of “Social Security Made Simple.” “When checking in 2017, your record for 2016 will still likely be missing data, so you’re looking for errors in your 2015 record and earlier.”
Prepare for common problems. The Social Security Administration processes an average of 236 million W-2 wage reports from employers each year for more than $5 trillion in earnings. The agency says 98 percent of these wages are automatically credited to workers without incident. But errors are not unheard of. Sometimes Social Security earnings are reported incorrectly by employers. The wrong name or an incorrect Social Security number might be entered into the system by the employer or employee. Issues might also arise if you change your name upon marriage or divorce and don’t notify the Social Security Administration.
Gather proof of your earnings. Make sure you keep paperwork that quantifies your pay. Acceptable documentation of earnings could include a W-2 form, your tax return or a pay stub. If you don’t have written documentation of your work history, write down the name of your employer, the dates you worked and how much you earned.
[See: 10 Social Security Claiming Strategies That Work.]
Contact the Social Security Administration. Once you have collected appropriate documentation, call the Social Security Administration at 1-800-772-1213 between 7 a.m. and 7 p.m. on weekdays. “If you discover an error in the earnings listed, the first thing to do is gather documents that show proof of the correct amount,” Anspach says. “Then set an appointment with your local Social Security office.” The SSA may contact your employers to verify earnings information.
High earners can’t include all their earnings. There’s a cap on the earnings that are taxed by Social Security and used to calculate payments. Those who earn more than the taxable maximum, which is $127,200 in 2017, won’t pay Social Security tax on that extra income or have that amount factored into their Social Security payments. The maximum taxable amount of earnings changes each year and has increased over time. For example, 20 years ago in 1997 the taxable maximum was just $65,400.
[Read: What is the Maximum Possible Social Security Benefit in 2017?]
The high cost of incorrect earnings. Your Social Security payments are calculated based on the 35 years of your career in which you earn the most. If an employer does not properly report one year of earnings to the Social Security Administration, your future payments could be about $100 per month less than you are entitled to, according to a statement from Jim Borland, a spokesperson for the Social Security Administration. Over a lifetime, one year of unreported pay could cost you tens of thousands of dollars in retirement benefits or payments to family members.
Emily Brandon is the author of “Pensionless: The 10-Step Solution for a Stress-Free Retirement.”
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How to Correct Your Social Security Earnings Record originally appeared on usnews.com
