Monthly Archives: September 2013

Estimating Future Social Security Benefits

Many working Joes talk about Social Security as if it means the same thing for everyone, but the fact is there are many factors that may affect it in the dollars and cents sense. Estimating what Social Security benefits will be in the future is not as simple as it seems, even when going directly to the source.

According to columnist and professor of economics Larry Kotlikoff in an article in PBS Newshour, there are 6 ways for the Social Security Administration (SSA) to compute for benefits, and four online calculators. Asking a member of the Social Security staff will give you a number that may be different from all the other methods mentioned previously.

For example, a printed earnings statement from the SSA would provide assumed earnings in the future, but it will not take into account adjustments for inflation or real wage growth, which will affect the actual amount of benefits depending on the date of benefits availment. The same will be true when calling the SSA office, which will give numbers that will not specify an assumption of real wage growth. It may not even specify if it is net of Medicare or not.

In some cases, estimating Social Security benefits are based on what specific software will spew out which may not even be accurate. It is important that when such a need arises that the advice requested considers the different factors which will affect the final Social Security benefit, or one may be depending on figures which are not based on reality. This becomes a crucial point when planning for future expenses at a time when living on a fixed income may spell the difference between comfort and penury.

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