This Letter Can Be Worth $1 Million

This fall the Social Security Administration began mailing out benefit statements for the first time since 2011. It’s crucial information, especially if you’re poised to move to your beach condo in Boca soon. “For many upper-middle-class couples, those benefits can be worth as much as $1 million over the course of your retirement,” says Chris Jones, chief investment officer of 401(k) adviser Financial Engines.

To save money, Social Security had been directing people to its website for benefits information. After a backlash, the agency resumed mailings to most workers reaching landmark birthdays—ages 40, 45, and so on. Of course, you don’t need to wait for a paper statement to find out how your benefit stacks up. For an estimate, simply sign up online.

That’s well worth doing if you’re within a few years of retirement. Your future Social Security income is key to determining if your financial strategy is on track. Then take these steps.

Proofread it. Make sure your earnings history is accurate. “If Social Security doesn’t have an earnings record for a particular year, there will be a zero, which may reduce your benefit,” says Boston University economics professor Laurence Kotlikoff, who heads MaximizeMySocialSecurity.com, an online benefits calculator.

Set your target. Your statement will have the income you can expect at three different retirement ages, assuming you keep working at your current salary. But you have far more options for when to start collecting benefits. If you are single, have never married, and don’t plan to work in retirement, your choice will be straightforward most of the time. Your main decision is whether to delay filing, which will boost your benefit by 6% to 8% a year up until the maximum at age 70. Financial Engines and AARP have free online tools that let you compare your annual and lifetime benefits based on the age you claim.

Plot the best strategy. If you’ve ever been married, your choices are more complex. “Your claiming strategy can be the biggest retirement decision you’ll make,” says Jones. Coordinating benefits with your spouse the right way can add as much as $250,000 to your lifetime Social Security income, according to Financial Engines. That’s why you may want to pay for a calculator that allows you to add more variables, such as working in retirement or a wide age gap in your marriage. MaximizeMySocialSecurity.com ($40) and SocialSecuritySolutions.com (starts at $20) both do that.

Get a reality check. Once you have a rough idea of your future benefit, plug that number into a retirement-income calculator, such as the tool at T. Rowe Price. You’ll see if your payouts, plus your portfolio withdrawals, are enough to ensure a comfortable retirement. If not, use the tool to see how saving more or working longer can help, or consult an adviser. Given the dollars at stake, devising a smart Social Security strategy can be well worth a fee.