Impact of the Social Security Statement

Q. What impact can the Social Security statement have?

A. The Social Security Administration (SSA) does not prepare Social Security statements out of the kindness of its heart—it is required to do so by law. The Congressional Research Service (CRS) has issued a report on the statements, which are useful regardless of the reason they are prepared. 

Zhe Li, Social Policy Analyst at the Library of Congress, and Dawn Nuschler, Specialist in Income Security at the CRS, in a July 18, 2022 report about the Social Security Statement suggest some effects that the statement has. 

Li and Nuschler cite studies that have analyzed the role the statement plays in the SSA’s communication with potential beneficiaries. Research, they observe, has found that receiving the statement may increase some types of knowledge about the Social Security program.

The benefit estimates the statement contains, write Li and Nuschler, can help individuals adjust their expectations of what the program will provide and inform their financial planning decisions, including when to claim Social Security benefits. They note that researchers have found that the information provided in the statement may influence an individual’s decision on when to claim retired-worker benefits and to apply for disabled-worker benefits, as well as mixed impacts on workers’ employment decisions.

Li and Nuschler point out that full Social Security retired-worker benefits are payable at the Social Security full retirement age (FRA). The FRA is 67 for workers born in 1960 or later; individuals can claim Social Security retired-worker benefits as early as age 62, but benefits claimed before the FRA typically are subject to a permanent reduction for early retirement. Individuals also can claim Social Security retired-worker benefits after the FRA; in that case, benefits claimed after the FRA are subject to a permanent increase for delayed retirement. “The reduction for early retirement and the increase for delayed retirement can have a large impact on an individual’s monthly benefit payment. For this reason, SSA provides a range of benefit estimates based on claiming age,” write Li and Nuschler. “The statement is considered to be one of the important tools SSA uses to communicate with the public and also a financial literacy vehicle to assist individuals and households with retirement planning,” they add.