Retirement planning can involve a maze of complex decisions. Add a little government bureaucracy to the mix, and you have a recipe for confusion! It’s no wonder, then, that so many myths about Social Security have perpetuated throughout the years. Before making any bold decisions about Social Security or your retirement in general, make sure you know the truth about these common misconceptions.
I should claim my benefits early, before Social Security runs out of money! The majority of current benefits are paid out of current FICA taxes, not the Social Security trust fund. Yes, the fund is set to run out of money by about 2034 if Congress does not make some significant changes soon, but that would only affect about one-third of your check. And if the constant media hype tells us anything, policy makers will concoct a solution well before that date. At any rate, Social Security is not going to run completely dry at any point in the near future.
I’m divorced, so I’m out of luck … I won’t receive Social Security. This can be an alarming situation, particularly for a former spouse without enough work credits to claim Social Security benefits based on their own record. In particular, divorced women who were homemakers often face this dilemma. But fear not: As long as you were married for at least 10 years, are divorced and currently single, you can claim benefits from your former spouse’s work record.
I won’t pay taxes on my Social Security benefits. Wouldn’t that be nice! But in reality, up to 85 percent of your Social Security benefits can be taxed. The exact amount of taxes you pay will depend upon your modified adjusted gross income and tax filing status for each year.
I can work all I want while receiving benefits, and the amount will not be affected. If you claim your Social Security benefits before your full retirement age, your checks can be reduced depending upon the Administration’s formula. Once you reach full retirement age, however, you can earn as much as you want without fear of losing part of your checks. Before making the decision to claim benefits early, make sure you’ve done the math. You can even call us for an appointment if you need help.
If I make a hasty decision with my benefits, I’m stuck with it forever. If you file for benefits and then regret your decision for any reason, you can withdraw your application. You will have to repay all benefits received, but then your slate is wiped clean. You can wait a few more years to file for benefits, and receive a higher monthly check.