Benefit projection may not be in the mail

At what age should you file for Social Security benefits? It's one of the most critical decisions you'll make that affects long-term retirement security.

One of the best decision-making tools to help with that decision is the annual benefit projection that we all receive in the mail from the Social Security Administration (SSA). But the SSA is about to stop mailing out those statements to save money in Washington's current budget-cutting environment. The agency will save $30 million by suspending mailings for the remainder of the current fiscal year, which ends in September, and an additional $60 million next year by restricting mailings to workers 60 and older.

Statements usually are sent out about three months before your birthday; the suspension started last month, which means everyone with birthdays in July and later won't get a paper statement this year. Next year, the SSA intends to resume sending statements to Americans over age 60; it's working on an online download option for everyone else.

Personally, I'm OK with online access to just about everything -- it's greener and saves money. But the paper Social Security statement provides a valuable annual reminder of what you can expect and how benefits are calculated. It also prompts us all to make Social Security part of our long-range retirement plans.

Most importantly, the statement includes a projection of your benefits based on varying retirement ages. That drives home the point that you get the maximum monthly payout by waiting, if at all possible, at least until the age when your full benefits are available -- the so-called full retirement age.

Monthly benefit payments are 8 percent higher for every year you wait, up until age 70. That can really add up over time; if you wait until age 70 to claim benefits, your monthly income will be about 76 percent higher than it would be if you had claimed benefits at age 62, according to the National Academy of Social Insurance.

Many workers worry that they'll clip their lifetime payouts by waiting. But Social Security's most important function is to protect you from longevity risk -- that is, the risk of running out of money in advanced age, when work probably isn't an option, pensions may be eroded by inflation and savings may be depleted.

And for married couples, if the higher earner is the man it's especially important for him to wait to file as long as possible. Women usually outlive men; Social Security's survivor benefit allows a widowed spouse to receive 100 percent of her husband's benefits.

The SSA also is shelving plans to open eight new hearing offices to handle the backlog of disability claims, which has soared during the recession. Each disability claim is reviewed by an examiner; filings have jumped from 2.6 million claims in fiscal 2005 to 3.0 million in fiscal year 2009 and 3.2 million fiscal year 2010. The claims process is complex, and the wait is long, averaging 800 to 900 days in many cities and sometimes as long as 1,400 days.

The SSA had been making progress clearing the backlog early this year, but that progress likely will stop with the latest budget cuts.

Filings for retirement benefits are much simpler and typically are processed in just a few weeks. SSA doesn't expect the cuts to impact turnaround time for retirement benefit applications, which can be filed online at ssa.gov/onlineservices, by phone (1-800-772-1213) or at your local Social Security office.

Here's hoping that the new online statements incorporate some of the improvements mentioned above. And an email alert system would be a good way to remind us to go online and look at the statements.

For now, you can get an estimate of your benefits using the SSA's excellent online Retirement Estimator tool at ssa.gov/estimator, which pulls up your personal benefits and allows you to do "what-if" scenarios for filing at different ages.

Or, drop by your nearest Social Security office -- before they decide to shut it down.

Mark Miller's Retire Smart column is carried on Tribune Media Services.