Personal Finance Tip of the Week, By Financial Fundamentals, LLC of Watertown

If you are younger, it’s easy to overlook your Social Security retirement benefits. After all, retirement may be a long way off, and you may feel that the system won’t be robust enough by then to provide you with meaningful benefits.

But it’s important to pay attention to your benefits, even if you are younger. There are two reasons why:

1. Your Social Security retirement benefits will probably be the single largest contributor to your household income once you retire.

Most of us will need to rely on Social Security and our own retirement savings (in a 401(k), 403(b), IRA, or other retirement account) for our retirement income. Unless your earned income is high or you are a disciplined saver during your working years, Social Security may end up being a larger contributor than your own savings.

2. The Social Security Administration (SSA) uses your wages to determine your benefits.

They sometimes make mistakes. You should double-check their figures to make sure you receive all of the benefits you deserve.

It’s easy to review your benefits. The SSA offers an online service called “My Social Security Account” (http://www.socialsecurity.gov/myaccount/) that displays your latest Social Security statement. The statement lists the amount of monthly income you are eligible to receive in retirement, as well as the wage figures that were used to determine your benefit.

You can also get a copy of your Social Security statement by visiting your local SSA office.

In addition to reviewing the facts and figures in the statement, take a minute to calculate the percentage of your current income that Social Security will replace. For example, say you earn $5,000 per month and the statement indicates you will receive $2,000 per month in benefits. That means that Social Security will replace only 40% of your pre-retirement income in retirement. Could you live on 40% of your current income once you retire? Probably not. This may give you an added incentive to maintain - or even increase - your regular contributions to a retirement savings account, so that someday these savings can supplement your Social Security benefits.

You may be skeptical that you will ever receive a meaningful Social Security benefit. And your skepticism isn’t unfounded. The SSA currently pays out more in benefits than it receives in payroll taxes, and it will lack the resources to pay out full benefits by 2037 unless reforms are made to the system. If you are concerned, you may want to check out the “Social Security Predictor” tool that was created by the Financial Planning Association and a Social Security policy expert, David M. Walker (http://www.SocialSecurityPredictor.org). The tool predicts whether you will receive your full benefits and whether your benefits will impacted by reforms that are under consideration.Social Security benefits are critical to your financial future. Take a little time this year to learn more about the system, review your statement, and renew your commitment to saving regularly on your own.

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Stephen Barkhuff, CFP(R), CFA, MBA is the founder and president of Financial Fundamentals, LLC, based in Watertown, MA. Financial Fundamentals helps couples and singles with modest incomes take control of their financial future. You can reach him at mailto:SBarkhuff@FFundamentals.com.