Social Security Yearly Statements Changed

[BLSonRP]

Something Changed on the Social Security Yearly Statements.

I am very diligent about getting my SS Yearly Statements from their website. (I also run a Benefits Estimator set of reports - using income gradients from 0K to 200K, in 10K intervals - every year. Assuming retirement at 70, and future incomes from 0 to 200K.)

My sister in law noted that her SS Yearly Statement shows her SS benefit being reduced (by some $150 a month) - she is further from retirement than I am. I ran my report in response and my Yearly Statement also shows a benefit reduction (at the latter years). It seems the further out you are from retirement the more the reduction is.

However, when I run my reports on the Benefits Estimator Calculator, the numbers increase (per usual) - so the Yearly Statement and the Calculator numbers do NOT match up, or even show the same trend.

Does anyone else keep a historical record of their SS Yearly Statements, and have you run it lately and seen that the future benefits are off?

[fffred]

@BLSonRP 

This is a bit of past history for me as I am now collecting my retirement benefit. But. In the olden days I religiously saved the annual SSA statements that were sent to me and I filed them away. Once the information became available on "My Social Security" and the annual statements were no longer mailed I stopped paying much attention to them. By this time I was in the home stretch to retirement and I wanted firmer answers than the estimates on the annual report and in "MSS".

To that end, I used the "AnyPIA32.exe" software published by the SSA and updated annually for changes. I found that the results from the SSA program and from other calculations (my own spreadsheets and various on-line calculators. Oh, and I used the "Maximize My Social Security" software for one year's subscription as well) all agreed with each other. Well, I may have had to tweak each source to get the results to agree properly. And in the end these agreed with what I saw in My Social Security as projected benefits at different ages. I checked this regularly for maybe 10 years, from age 60 to 70. A few times there were some discrepancies which I was able to resolve. At the time that I collected my benefit I was assured that the SSA amount was accurate per my own calculations using the AnyPIA32 software and my own spreadsheet.

AnyPIA32.exe can be downloaded in Windows version from the SSA at https://www.ssa.gov/oact/anypia/download.html   It does require a Windows computer and you must install it locally on your computer. It does have a learning curve but once past that it can be very useful for studying various scenarios.

For someone not interested in the grief trying to get AnyPIA32 running I suggest using the Open Social Security Calculator, web based, at https://opensocialsecurity.com/about. This software will calculate (i) an "optimized" plan for claiming benefits, as well as (ii) claiming at age(s) that you stipulate. It will calculate the benefit at the indicated ages.

Open SS does require your PIA as an input. This may be given in your My Social Security (I don't recall) or you can use an on-line calculator such this for calculating your PIA given your historical record of annual earnings (you can get this information from My Social Security, copy and paste it into the PIA calculator). See https://ssa.tools/   Both the "Open" calculator and the ssa.tools are free, etc.

I think you'd be better served calculating your expected benefit yourself rather than depending on what's given on My Social Security based on their assumptions.

Good Luck!

[BLSonRP]

@fffred  thanks very much for your response. I was unaware of the tools you've highlighted here - for more accurate results on what payments would be. Appreciate these insights, I'll make note of these and follow up with them.

I appreciate the response and pointing to tools I was unaware of.

Since my sister in law is seeing a reduction of $150-$200 from last year's estimates, I really was hoping that someone who is actively following yearly statements would have responded. (Also odd that my estimates in the Yearly Statement, vs the Calculator have changed this year as well.) Still doesn't seem that anyone else has read/responding-to this who may have noticed such a change.

Thanks again for the pointers to tools!

[fffred]

@BLSonRP 

I do not expect there to be a year over year reduction in the expected benefit as reported in your SSA statement. I expect an increase, or no change (very unusual), but not a decrease. Then again, my experience is pretty mainstream.

The retirement benefit is based on the "highest" 35 years of covered income, as adjusted for inflation. This gives the "Average Indexed Monthly Earnings" (AIME) (except that earnings after age 60 are no longer adjusted for inflation). It's likely that the AIME will vary each year but it should increase over time; I don't see how it can decrease, though it's been awhile since I delved into the calculations. But feel free to read about the AIME.

It seems highly unlikely to me that the AIME will ever decrease, thus decreasing the PIA. I don't think that the SSA applies negative inflation rates in the event there is deflation, and there's not been any of that in the past few years anyway.

My suggestion, run those programs to get a precise answer. The SSA annual report is terribly trustworthy for someone wanting accuracy and precision.

You may want to double check the income values reported for your SS account. It's not unknown for errors to occur. Then you'll have to get any tidied up.

ps:  I am curious about a decreasing AIME. Someday when I have time I will study this numerically.

[GailL1]

@BLSonRP 

These are ESTIMATES - age 62, age (FRA) and at 70 - 

What comes to mind initially would be that your earnings for the last year that is counted was lower than it was say, for the year or so before that year.

The program assumes that you will keep working at a range that will be equal to what you were making - but if that income drops in the last year, it could show a drop in this estimate.  

I haven’t looked at one in a long time and It could be that it is pulled from (2) years back depending on when it was calculated.  Also, if you are looking at a 70’s pay out figure - it could be that one year of the delayed retirement credits hadn’t been included when you pulled the report - I don’t know on what schedule they do that either.

[BLSonRP]

Thanks for the response @GailL1 , I understand your reasoning (and in my case - that is true, I have reduced my income by working a lesser schedule so it does make sense the Yearly Report, because of assumptions, would change. Can't say if that is the case for my sister-in-law).

The 2 year back data being pulled, could be you are thinking of Medicare (that's how IRMAA gets calculated).

However, because of the assumptions in the Yearly Statement, is exactly why I run the gradient reports (0k - 200K) in the Benefits calculator (to protect against the ESTIMATE assumptions in the Yearly Report). I appreciate your response, but it is (admittedly) filled with assumptions in itself - so needs more research to be definitive.

Since I haven't gotten any responses, other than yours thus far, could be that nobody else is tracking these as closely. Generally, I was looking for something where others have done the same kind of steady analysis, rather than rely on whatever is produced on the website in the moment.

Thanks for responding.

[GailL1]

No, Medicare premiums would have nothing to do with the estimates of benefits on the yearly statement.  

To my knowledge the NWI has never gone down but check the specific year from this list - the increase is greater in some years than the next.

https://www.ssa.gov/oact/cola/AWI.html 

Was there a recent year when your SIL perhaps had earnings that were above the current year tax max cap?  

It has been a very, very long time since I have retired and can’t even remember the last year I looked at one of those statements.  So sorry, that all I got.

[BLSonRP]

@GailL1  you have missed the point(s) made. I never said that Medicare had anything to do with estimates on the yearly statement. What I said was that your "remembering" something about income-2-years-ago may have been that in your mind you had conflated the two (when they are indeed disparate). I was stating that they are not connected at all.

My SIL earnings were not above the year max cap. Her income did increase over previous year (heard back from her on that), but not by a significant amount.

Nevertheless, because you haven't looked at such things in a number of years, and (to your own admission) everything stated has been conjecture - the conversation doesn't approach anything near toward contributing to greater understanding of the potential issue.

Only what was asked for, someone who has kept up with doing analysis (and particularly is a bit away from retiring) might have seen any pattern similar or different.

Since that's not the case, with conjecture, it doesn't move us to understanding. Appreciate your willingness to engage, but was really seeking someone to contribute toward clarification (through data, or actual review) as to why the pattern has shown itself now.

[Tonster521 · Accepted solution]

@BLSonRP It appears you are looking for the mathematical logic why an estimate will decrease. The answer could be that nominal earnings have not increased greater than the decrease in COLA. Your Average Indexed Monthly Earnings (AIME) includes nominal earnings which are indexed (due to COLA or inflation). COLA has been decreasing. For 2023 and 2024, COLA was 8.7% and 3.2%, respectively. If your nominal earnings were the same in 2023 and 2024, your AIME for 2024 will decrease 5.5% for 2024. It will decrease again in 2025 due to a decrease in COLA to 2.5%, although not as dramatic. If your nominal earnings increase due to a raise, promotion, working overtime, bonus, etc. those increases may offset the small reduction .7% in COLA. I am providing a link by copy and paste https://www.ssa.gov/oact/cola/awifactors.html from the SS website.  The concept to remember is that for most folks indexing increases nominal earnings by approximately 30% to 40% or more to develop AIME. Indexing stops at age 60. After age 60, only your nominal earnings are used to develop your AIME.

[BLSonRP]

@Tonster521  Thanks very much. That provides me with the rational explanation that I was looking for. Appreciate the information, and the link. Very helpful!

[GailL1]

@BLSonRP 

Sorry I could not help you - thus I will leave you with this link which you may find useful in trying to answer your question on your SIL statement.

SSA.gov- 01/2020 - Analysis of Benefit Estimates Shown in the Social Security Statement 

[BLSonRP]

@GailL1 Thanks for the link, that's helpful. Quite involved, but it certainly helps in understanding how they do their estimates.