Using Social Security Estimates with Caution

You can receive from the Social Security Administration an estimate of your retirement benefits. You can call, wait for an estimate to be mailed, or go online and use Social Security’s calculator. The estimates are helpful in retirement planning. But remember these are only estimates. They are based on a number of assumptions that might or might not turn out to be accurate. Here’s a good review of where the estimates could go wrong. It argues that the official estimates deliberately use assumptions that give low ball results in an attempt to encourage people to save more for retirement.

”The Social Security Administration’s benefit online calculators aren’t to be trusted for use for people under age 60, even for someone who is
single and was never married and will never marry. The reason is that unless you change their assumptions, they assume (in contradiction to the Social Security Trustees’ Report’s own assumptions) that the economy will experience zero economy-wide average real wage growth and zero inflation between now and the end of time. That’s an odd assumption for an economy that’s experienced positive average real wage growth rates as well as inflation for each of almost all the postwar years.”