Social Security is a big deal in America. The body, which is often viewed as a guaranteed safety net, is something to consider only when you’re nearing retirement. While this might be true, it’s dangerous to rely on outdated or incorrect beliefs about Social Security; depending on them might cost you over six figures throughout your retirement years.
With Americans having a longer life expectancy these days, alongside healthcare costs rising steadily, it’s important to get the maximum benefits and make the most out of your retirement savings. However, with so much information on the internet, several older citizens often lean on outdated and incorrect information related to their social security benefits.
As per a report, some of this wrong social security information comes from hearsay, surface-level social media posts, or just someone trying to be a fraud. Nevertheless, here are some common myths about social security benefits.
Firstly, one of the most common—and costly—misconceptions is that you should start collecting Social Security as soon as you’re eligible at 62. While that’s an option for those who have a lot of financial needs or major personal issues, collecting the benefits early can reduce them by up to 30 percent compared to those who would claim when they reach the full retirement age at 67 or even 70, depending on your birth year.
If you delay claiming until age 70, your benefits increase by 8% for each year beyond full retirement age. Over time, that difference could total more than $100,000 in lost income, particularly if you live into your 80s or 90s.
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Secondly, there has been a repeated saying that the Social Security fund would dry up by 2033, but that doesn’t mean the program will crumble. Even if the trust fund is depleted, incoming payroll taxes are expected to cover roughly 75% to 80% of scheduled benefits.
A similar crisis like the one discussed here had occurred back in 1983. Without the intervention of Congress, the funds would have suffered significantly by 2023. But due to the Social Security Amendments of 1983, which were passed by Congress and signed by then-President Ronald Reagan, it raised taxes a bit, slowly increased the retirement age, and started taxing some benefits to make the program more stable, as reported by The Motley Fool.
Therefore, if needed, the government will take the necessary steps to retain it again. Thirdly, there’s a misconception that an average American individual cannot work once they start collecting their benefits.
That’s not the case. If you’ve reached full retirement age, you can work and collect benefits with no reduction, even if you claim your benefits before reaching your FRA and earn more than a set amount ($22,320 in 2024); a part of your benefits may be temporarily withheld. But once you reach full retirement age, those withheld benefits are recalculated and added back into your monthly payments.
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Another misconception includes people believing that the last job you do determines the final benefits. It’s not true. Social Security doesn’t base your benefits on your final job or most recent salary. Instead, it calculates them using your highest 35 years of earnings. If you don’t have 35 years of work history, the remaining years are counted as zeros, lowering your average.
Lastly, many Americans believe that once you start claiming your social security benefits, there’s no looking back. This assumption is not true. You can withdraw your application within 12 months and repay any benefits you received. This opportunity gives you the chance to delay claiming and lock in higher future payments.
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However, this feature is only available once. It can be a powerful one if you really replan your post-retirement finances and give it a go. Please don’t forget to reach out to the stakeholders in case of confusion, and keep an eye on the website to be updated with all the new changes.
Remember, a poor financial decision can cost tens and hundreds of dollars from your Social Security retirement plan. Be safe, be aware, and don’t fall for baseless myths.
