Clearing Up 5 Myths About Social Security

Navigating Social Security benefits is difficult enough without wading through misinformation. In this blog post, we break-down five commonly-held myths about Social Security benefits.

Myth #1: You have to Claim Your Social Security Retirement Benefits at Age 62

While you can claim your Social Security retirement benefits at 62, you do not have to claim benefits at this age; in fact, waiting can translate into real financial benefits.

The Social Security Administration calculates your base benefit from your “full retirement age,” or FRA, determined by your date of birth. This information, along with your average indexed monthly earnings from the 35 years in which you worked the most, will determine your benefit.

You can find your FRA at Social Security Administration’s website or in a paper statement from the Social Security Administration. If you were born between 1943 and 1954, your FRA is 66. If you were born later, you probably have an FRA of 66 (plus some months) or an FRA of age 67.

If you claim your benefit before your FRA, you lock in a permanent reduction in monthly income. Claiming at 62 translates to a reduced monthly income of 25% to 30%, depending on your FRA. Claiming early can reduce your monthly retirement income, every year, possibly for decades. Nowadays, 25% of men live until 93, and 25% of women live until age 95, so it is important to plan carefully for the years ahead. If you can, try to maximize your income for retirement, as it could last longer than 30 years.

Unlock Bonus Income By Waiting Until Age 70

Waiting to claim Social Security until after your FRA comes with a considerable bonus: 8% additional monthly income per each year you wait.

  • If your FRA is 66, your monthly income increases 32% by waiting.
  • If your FRA is 66 years and 6 months (if you turn 62 in 2019), waiting increases your monthly income by 28%.
  • If your FRA is 67, waiting increases your monthly income by 24%.

Myth #2: You’ll Get Back What You Pay into Social Security

Everyone’s situation is different, and because of all the claiming strategies and variables involved in calculating Social Security Benefits, the Social Security Administration no longer offers a break-even calculator on its website. These benefits are designed to create a secure source of income for retired or disabled individuals and insured workers’ survivors. Your contributions to this safety net provide current recipients with benefits, and create a guaranteed income benefit for you when you retire.

One of the biggest benefits you get when contributing to the Social Security Administration’s safety net is an inflation-protected guaranteed income source for retirement, ensured against the risk that you outlive your savings. These are not benefits you can get simply by saving money in a bank account. Even if you live past 100 years old, you will continue to receive a monthly income.

Myth #3:  My Ex-Spouse's Actions Can Reduce My Social Security Benefits

Ex-spouses cannot influence your Social Security benefit. If your spouse has Social Security benefits, you may be entitled to your own benefit once you reach your FRA, or 50% of your ex-spouse’s benefit, whichever is higher. You can claim these benefits by making an appointment with your local Social Security office. Make sure to bring documents that prove both the marriage and divorce. Though variables like children and your age impact this benefit, if you were married for ten years and you have not remarried, you will be able to claim these benefits.

Myth #4: Benefits Are Only Based on Wages You Earn Before Age 65

Benefits are calculated based on your highest 35 years of earnings. These do not have to be consecutive years, or years before age 65. Eligibility for Social Security retirement benefits is dependent on achieving a minimum of 10 years of covered employment, equal to 40 credits in the Social Security system. This means that if your work after age 65 is high enough to be a part of your highest-earning 35 years, regardless of whether or not it is full or part-time work, those years will be included in Social Security benefit calculations. Tools located on the Social Security Administration’s website can do these calculations for you.

Myth #5: When You Claim Retirement Benefits Early, You Get a “Bump Up” Once You Reach Your FRA

Though this would be nice, there is no income bump once you reach FRA. However, you can be strategic about your claims:

  • As you learned from our de-bunking of Myth #1, you can increase your benefit by waiting to claim your benefits.
  • You can voluntarily “suspend” your benefit and resume it again after you reach your FRA, as late as 70. If you decide to take this option, your annual benefit will increase by 8% until age 70. After age 70, you get an annual cost of living adjustment, but no change to your automatic base benefit.
  • You can cancel your Social Security retirement benefit claim once within your lifetime, as long as it’s within the first 12 months of receiving benefits. You must pay back the full amount, and the full amount received by any current spouse or family member. You can then claim benefits again later to receive a larger monthly payment.

Avoiding Future Myths

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Monica Bryant