Since starting his business in 1995 Coventry financial planner William Howe has had at least four clients discover mistakes in their Social Security accounts, which can play an important role in retirement finances. One man discovered that three years of payments from a former employer weren’t credited to him at all.
Though the mistake had occurred almost a decade earlier, Howe’s client was able to clear up the situation in a matter of weeks by contacting the Social Security Administration. Luckily the client’s former employer was still in business.
“It was corrected with the Social Security Administration talking to the employer,” said Howe, who started The Howe Group after spending more than 20 years working for college financial investment departments, including Brown University.
“If the employer didn’t exist, if the records had dropped out of existence – it would have been pretty horrifying,” he added.
How did his clients find out about the goof ups though?
They simply requested a Personal Earnings and Benefit Estimate Statement (PEBES) from the Social Security Administration. It’s free and can be requested over the telephone, through the mail and via the Internet.
And starting in October, the SSA will automatically send statements to workers ages 25 and over, who are not already receiving benefits, according to John B. Trollinger, the SSA’s deputy press officer. Congress made it mandatory for the SSA to send out annual statements, which will result in 125 million workers receiving the reports, he explained.
Since the SSA began offering PEBES in 1988, some 37 million U.S. workers have requested a statement, Trollinger said. When the SSA learned it would have to issue annual statements to most workers it began a test system, which resulted in another 40 million reports being mailed out since 1995, he added.
“Whether you are young or old, male or female, single or with a family, it is never too soon to plan for your future,” said Social Security Commissioner Kenneth S. Apfel, in an April 9 statement. “The Social Security Statement will help Americans prepare today for their financial security tomorrow.”
The Social Security Act was passed in 1935 to help people support themselves after retirement. Congress has expanded the law several times to include coverage for the worker and family members in the event of the worker’s death or disability.
A PEBES, which was recently renamed Social Security Statement, includes earnings reported for an individual worker dating as far back as 1951, according to Trollinger. The report, however, does not itemize the information by employer or even list employers, instead it lists yearly totals, he explained. A report will also indicate what a worker’s projected benefits would be in case of retirement or disability and death and disability benefits for family members, he said.
“Social Security is one building block of retirement,” Howe said. So he, like many other financial planners, feels it’s important for clients to find out what their projected payments are; to make sure that all employers have accurately reported and paid into the system; and to make sure it’s been properly posted.
Mistakes do happen, he said. “If you catch it early, it’s easier to fix.”
Trollinger said documentation such as a W-2 statement of annual wages and tax payments, or pay stubs is usually required to support a worker’s claim.
Rick Misbin, president and chief executive officer of the Capital Group Financial Advisors, Inc., in Cranston, added that workers should pay attention since there’s only a limited time to make corrections. “If you don’t bring it to their attention within three years, they won’t correct it,” he explained.
Trollinger acknowledged there are some statutes of limitation on correcting mistakes, but he said the SSA will fix mistakes at any time if a worker’s earnings history was incorrectly reported, provided, that is, the employer still exists and is able to verify the problem.
Posting errors by the SSA is rather infrequent, Trollinger added. Last year the SSA received nearly 270 million wage reports from employers, of which 99 percent were posted accurately, he said. But mistakes can happen, including mixing up Social Security numbers and having names and numbers that don’t match, he added.
Workers might find other possible surprises when they receive a report.
“Many people may forget that they may have had a job at one time in their life where they may not have been covered by Social Security,” he explained. “For instance state workers, teachers, police officers, firefighters sometimes aren’t covered and military wages prior to 1956 don’t show up.”
“Social Security represents a rather major portion (of income) for the average wage earner in retirement,” Misbin said. “It’s extremely important when calculating a person’s retirement (finances).”
Misbin started his financial planning company in 1964, and recently changed its name from Investment Planning Consultants, Inc.
Typically when a client seeks retirement planning advice, the first thing Misbin does is have them check their projected Social Security benefits. The SSA cannot provide information to anyone without the worker’s permission, according to agency policy. After determining a client’s projected Social Security benefits, Misbin said he reviews pension information, 401(k) accounts, inheritance money and other factors to help determine a retirement savings strategy.
To request a Social Security Statement call 1-800-772-1213 or visit the SSA Web site at www.ssa.gov. It takes about five weeks to get a report.
