Social Security is the most important and vital program for retirees. But it’s also a topic that many people know very little about, making it easy to believe false information. Here are five of the most common myths about Social Security that you should be aware of.
The what is the $15,978 social security bonus most retirees completely overlook is a myth that many people believe. However, this is not true and the Top 5 Social Security myths will help you know what to expect when you retire.
While “it’ll work itself out” may be a common attitude when thinking about future Social Security benefits, especially if you’re still young, you don’t need to be an expert to see that this approach is unlikely to produce the outcomes you’re looking for in your retirement years. You’re not alone: just 41% of individuals have calculated how much money they’ll need in retirement.
It’s perfectly understandable — and even normal — to feel overwhelmed and prefer to avoid thinking about the actual logistics of setting yourself up to live a laid-back lifestyle.
However, some Americans see it as a rite of passage that should be planned for as early as possible. Even if you don’t expect Social Security to be a silver bullet for living through your senior years, it may be an essential component of your long-term financial planning.
What is Social Security and how does it work?
The Social Security Administration has been around for more than four decades, having started off as the Social Security Board when President Franklin D. Roosevelt signed the Social Security Act in 1935.
The initiative calls itself a “anti-poverty program,” offering “retirement, disability, and survivor’s benefits.”
While the concept of a Social Security safety net didn’t truly take hold in the United States until 1935, in part as a response to the Great Depression, which saw nearly 15 million people lose their jobs, the worries it addresses about one’s future economic security are as ancient as human history itself.
It should be emphasized, however, that the provision of formal programs to help people with financial problems is still a very new idea. To put it another way, it’s still a work-in-progress.
Getting to the bottom of the Social Security misconceptions
Here are some crucial initial steps in deciphering the truth about Social Security misconceptions.
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1. You must begin claiming Social Security at the age of 62.
This is a Social Security myth that misinterprets a person’s earliest Social Security eligibility as a required start date for receiving benefits — but only if they were born between 1943 and 1954. If you were born between those years and began receiving Social Security benefits at the age of 62, your monthly benefit amount “is cut by approximately 25%.”
If you wait until after 62 to retire, the amount will be somewhat increased each year; by 66, you should be able to qualify for a rate that is more than what you put in. However, even if you wait until you’re 70, the advantages will cease rising.
These figures may vary based on your age and whether or not you were self-employed and didn’t have an employer contributing to your Social Security.
There are a variety of reasons and situations why you may not wish to wait until you’re 70 to begin collecting Social Security: It’s possible that health issues may come into play, or that you’ll wish to pursue a second job as you become older. After all, life is about more than just money!
However, these are choices that should ideally not be made at the last minute — SoFi’s method for determining when to retire is a smart place to start, and since not everyone living today was born between 1943 and 1954, this SSA chart is helpful for those who were born outside of that period.
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2. You will never receive your money back from the program.
This is yet another popular Social Security myth, one that exaggerates or paints a gloomy picture of how the system operates or may evolve in the future. The Supreme Court decided in 1936 in Helvering v. Davis that Social Security was constitutional, but that “the profits… are to be paid into the Treasury like internal-revenue taxes generally, and are not designated in any manner.”
Those last five words — not earmarked in any way (implying that there’s a widespread fear that the money won’t be guaranteed) — have lingered in the public consciousness for a long time, and because laws change, it’s contributed to an uneasy attitude toward Social Security and the returns you can expect on your investment.
This Social Security myth serves as an excellent lead-in to the following, which is one of the most widely circulated Social Security myths.
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3. Social Security will be phased out.
Concerns regarding the program’s viability are widespread. According to a 2019 study by the Transamerica Center for Retirement Studies, 77 percent of employees are worried that when they retire, Social Security would not be there for them.
The board of trustees that administers Social Security’s retirement and disability programs did describe a scenario in which “…the estimated hypothetical… asset reserves become exhausted and unable to pay scheduled benefits in full on a timely basis in 2035,” according to the 2019 annual report. This, however, is dependent on assumptions. If the report’s forecasts were overly pessimistic, the future may be better than it seems. In addition, the fund continues to collect deposits in the form of Social Security taxes paid by working individuals.
There’s a possibility that the amount of payroll taxes that go into the fund may rise in the future, so preparing ahead is a good idea.
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4. You won’t be eligible for Social Security if you’re self-employed.
When it comes to Social Security, freelancers and the self-employed face trade-offs. While individuals have more freedom in terms of selecting their job, they also do not have an employer that matches their payments to retirement plans such as 401(k)s.
It also means they don’t have an employer who can assist offset the 12.4 percent Social Security levy on earnings. Employers and workers typically split this rate, but since self-employed people are their own bosses, they pay the entire 12.4 percent instead of the 6.2 percent on earnings received.
If you pay your taxes, you’re contributing to Social Security, which means you’ll be eligible for benefits in the future.
If you’re a freelancer or self-employed person, you’re unlikely to have access to an employer-sponsored 401(k), but there are still alternatives open to you.
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5. If you retire and reside overseas, you won’t be able to receive Social Security.
This Social Security myth comes under the “it depends” category. The Social Security Administration has a whole booklet devoted to how payments to U.S. citizens and non-citizens operate when they’re outside the nation, as well as an online tool to see whether your payments can continue in the country or territory where they’re seeking to raise a flag. Payments to individuals living in North Korea or Cuba, for example, are not possible owing to US Treasury restrictions.
There are certain nations where money cannot be transferred in general, however there are exceptions. If you’re traveling to one of those nations, the SSA says they’ll hold your payments until you return to a place where they can transfer them. The regulations differ for U.S. citizens and non-citizens, so be sure to double-check your situation.
However, if you intend to retire in one of the hundreds of other nations to which the SSA may make payments, you should be OK. If you’ve already begun preparing for retirement in a nation where you won’t be eligible for Social Security, SoFi’s guide to rebuilding retirement funds may be worth a look.
It’s not a good idea to do it alone.
These are just a few of the most prevalent Social Security misconceptions. You’ve probably heard of several Social Security misconceptions that aren’t on our list.
Whether you’ve never considered retirement before or have already begun your research, you should talk with a qualified adviser about where you are now and where you’d want to go financially in the future.
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MediaFeed.org syndicated this story, which first appeared on SoFi.com.
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The social security 10 year rule is a myth that has been around for a while. It’s not true and it will not happen.
Frequently Asked Questions
How can I get more $16 728 on my Social Security?
Social Security is a government-managed program that provides financial support to people who are retired or disabled. You can get more money by taking out loans, investing in the stock market, or starting your own business.
Is Social Security getting a $200 raise in 2023?
What is the most one can draw from Social Security?
The most one can draw from Social Security is $2,000 a month.