Does the Social Security “Statement” Add Value?

Social Security is the nation’s most important source of retirement income, providing half or more of the monthly income of well over half of all retired house­holds. Workers planning their retirement thus need to know how much they and their spouse will get and how much more they could get if they work longer and claim later. Benefits, however, are set by a complicated formula based on a worker’s lifetime earnings record at retirement, the age he claims, the earnings record of a current or former spouse, whether that spouse is alive, and when that spouse claimed. So workers, on their own, cannot be expected to know how much they could get. The Social Security Administration (SSA) started an ambitious initiative in 1995 to address this issue. It began mailing out personalized annual Statements that provided estimates of an individual’s monthly benefit at various claiming ages. This brief reports the findings of studies produced by the Social Security Administration’s Retirement and Financial Literacy Research Consortiums that assessed the effectiveness of the initiative – whether the Statement made workers better informed about their benefits and whether it changed their behavior.