7 Social Safety Myths That Can Price You in Retirement


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The closer we get to retirement, the more important the strict rules of social security suddenly become. Still, many Americans struggle with mastering the ins and outs of Social Security.

The danger of buying your way into social security myths is that they can form the basis of decisions – even early in your working years – that affect your finances in retirement.

Here is a look at some popular myths and misconceptions about social security.

1. The retirement age is 65 years for everyone

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Reality: The retirement age varies depending on the year of birth. For example, if you were born in 1960 or later, it will be 67 years old.

Until you reach “full retirement age” or FRA, you cannot receive 100% of what you are entitled to.

It is understandable that many people are confused: 65 was the original full retirement age as set out in the Social Security Act of 1935. Our story, “70% of Older Adults botch this basic retirement question,” explains that many American adults are confused about this issue.

In 1983, Congress raised the retirement age for Social Security in recognition of the improved health and longevity of older Americans. The retirement age has been increased in small steps and ends with grades 1960 and later, who can claim full benefits at the age of 67.

To find out your full retirement age, use this table.

Money Talks News partner Social Security Choices offers an affordable, personalized analysis of your options for making social security claims.

2. Apply early and your benefit will continue to grow

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Reality: Wouldn’t that be nice? In truth, however, if you apply for Social Security, you will lock the benefit amount for life at this point, with the exception of an occasional small inflation adjustment. Entitlement to early blocking of a lower benefit.

Unfortunately, the notion that when you reach full retirement age you will enjoy an increase in your monthly benefit vouchers if you take early benefits is one of the “3 Big Misconceptions About Social Security”.

Definitions for “spouse’s allowance”, “proof of income”, “full retirement age” and other important terms can be found in “9 Social Security Terms Everyone Should Know”.

3. Everyone should wait until the age of 70 to receive benefits

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Reality: Starting at 70 is a good idea for many, if not most, of people. When you turn 70, you are receiving an oversized amount that could make a nice difference in your livelihood for the rest of your golden years.

But 70 is not everyone’s magical age, as you will see in “5 Times the Smartest Getting Started with Social Security Insurance”. Some reasons it may make more sense to claim earlier are:

  • They have a short life expectancy.
  • Your spouse is older than you and earns less.
  • You need the money.

For most of us, however, it is advisable to wait if possible, as you read in “7 reasons not to get social security at the age of 62”. If you postpone entitlement to benefits beyond full retirement age, your benefit will increase by approximately 8% per year.

Once you hit 70 that 8% per year growth ends and there’s no need to wait any longer.

4. You can comfortably live on social security benefits

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Reality: Social security should never be the only source of income for retirees. Your performance vouchers are only intended to replace a percentage of your earned income.

That is not to say that it is impossible to live on social security alone. “Comfortable” depends in part on your standards and the cost of living where you live.

According to the Social Security Administration, 21% of couples and 45% of singles who receive retirement pensions rely on these checks for 90% or more of their income.

We have written about counties in the United States where lower cost of living gives retirees the opportunity to extend their performance checks. We also wrote about “10 Places Where Social Security Provides the Best Standard of Living”.

Living abroad is another way to lower the cost of living in retirement. “10 Countries Where Retirees Can Live Big And Save Big” lists the best bets.

5. Everyone receives social security pension benefits

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Reality: You must have paid enough money into the social security system for enough years of work to receive benefits.

Normally a worker should have accumulated 40 or more “credits”. Working and paying into the system brings up to four credits per year.

Those who are unable to receive benefits have generally not worked or made enough contributions to qualify. This includes immigrants arriving in the US late.

“6 Groups Who Can’t Rely On Social Security Benefits” lists several other situations that prevent people from receiving benefits.

6. FICA tax payments were once tax deductible

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Reality. Here is another cherished piece of nostalgia that is just plain wrong. Our social security wage tax payments were never deductible.

Employee Social Security (FICA) withholding tax has always been non-deductible since the 1935 law that started the program, the Social Security Administration says. “The 1935 Act specifically forbids this idea in Section 803 of Title VIII,” the agency says.

Social security benefits? Another story. Performance checks were not subject to federal income tax from 1935 to 1984.

In 1983, Congress, with bipartisan support, passed law that changed this, and President Ronald Reagan signed it into force. Suddenly, up to 50% of a social security benefit can be counted as taxable income if the total taxable income of a taxpayer exceeds a certain amount.

In 1993 the law changed again. Now up to 85% of the benefits of beneficiaries with “higher incomes” are taxable.

7. Divorced? You can never get a spouse’s allowance

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Reality: It is true, in most cases, that if you remarry after a divorce, you will lose your entitlement to spousal allowance in your ex’s account. But there is one exception: when your ex is dead.

However, if your ex-spouse has passed away and you remarry at age 60 or later, you can receive a spouse’s pension based on your ex-partner’s record, says AARP, stating that however:

“If you are married, you cannot claim divorced spouse benefits who are tied to a living ex-spouse.”

If you are divorced and have not remarried, things are much better: divorced people who remain unmarried can apply for spousal allowance based on their ex-spouse’s social security records. AARP summarizes these rules:

  • Your marriage must have lasted at least 10 years.
  • Your ex-spouse is entitled to social security pension or disability benefits.
  • You are 62 or older.

Disclosure: The information you read here is always objective. However, sometimes we get compensation when you click on links in our stories.

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