If you have ever compared the estimate of your Social Security benefit generated by any financial forecast engine and the estimate that you can get at any time from the official website of the Social Security Administration (SSA), you ve probably noticed that they are different. And in the cases of many individuals who are young, they are likely to be radically different. So is one calculation better than the other?

The unfortunate answer is that both answers are probably fine, but you need to have some understanding of how the calculations are created. Let's take a brief look under the hood of both.

The SSA recently announced that it has ended the annual mailing of the statement to your home of your actual salary history, based on which you paid your FICA payroll taxes. Now you must log in to its secure website at www.ssa.gov and follow the specific instructions to retrieve it. Once you generate your official Social Security statement, you can find the calculations the SSA uses and compare them to your own assumptions.

Let's assume that you have properly filed your 2011 personal income taxes. The SSA will use the compensation you reported in 2011 as the amount to be earned in each of the future years until you are able to commence Social Security benefits at your Social Security Retirement Age, which can be as high as age 67. In 2011, if you were age 47 and earned $45,000, the SSA calculation engine assumes you will earn $45,000 in 2012, 2013, 2014, and so on for as many years as it needs for the calculation.

For any common calculation engine you may be using, you are probably able to include an assumption for your wage growth. Call it 3% per year as an example $45,000 thus becomes almost $60,500 after 10 years of 3% increases. So your calculation engine is likely going to produce a Social Security benefit estimate that is much higher when compared to the SSA calculation.

There are many other differences in the calculation to consider, including if your 2011 wages for payroll tax were much lower than before 2011. But careful inspection of the forecast assumption in your calculation engine will enable you to begin to understand why the estimates of your Social Security benefits can be so different.