Here are 5 dangerous Social Security myths that can ruin your retirement — are you falling prey to any of them?
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The ins and outs of Social Security benefits can seem as complicated as they are crucial to Americans’ financial comfort — or even survival — in retirement.
Personal finance experts like Suze Orman will tell you that your comfort in retirement hinges on what you can put away out of your paycheck using tools like a 401(k) or an IRA.
She put it plainly in an interview with Moneywise late last year when she talked about the plight of the Social Security program and the dangers of not saving and investing for retirement.
“How are you going to pay for those exact same bills later on in life, when you no longer have a paycheck coming in?”
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For many, the answer is their eventual Social Security benefits, a program you pay into out of those paychecks. But common misconceptions about those benefits can lead to significant, long-term financial hurdles that can tarnish your golden years.
You can maximize your benefits and gain more security in retirement if you sidestep these five common Social Security myths.
1: You can collect your dead spouse’s benefits and your own at the same time
Don’t count on receiving a double payment if your spouse passes before you. If you’re entitled to both a retirement benefit and the survivors benefit, you’ll receive only one — the larger — of the two amounts.
If the surviving spouse is at full retirement age or older, they can receive 100% of the deceased's benefit amount. If they’re between 60 and full retirement age, they’ll get between 71.5% and 99%.
To offset any social security income losses when your spouse passes, consider purchasing life insurance.
If you’re looking for a policy that will last a lifetime, with a locked-in premium and a cash value that can be tapped into while the policyholder is still alive, a whole life insurance policy from Mutual of Omaha* is the right fit for you. With coverage amounts ranging from $2,000 to $25,000 (in WA, $5,000 to $25,000), you can rest assured that your family will always be ready to cover any end-of-life expenses.
It only takes five minutes to fill out an online application* with your personal and beneficiary information. Once you register, not only will you be guaranteed coverage, but your benefits will never be reduced due to age or health. Plus, no medical exams or health questionnaires are needed to join.
2: Social Security will replace your paycheck
Even though experts like Suze Orman and Dave Ramsey constantly tell their viewers otherwise, many people believe Social Security alone will sustain them in retirement— but the benefit is only meant to supplement it.
This is why starting the process of planning for retirement with investments and savings as early as you can is so important if you hope to keep up your lifestyle.
It might be worth looking into a Gold IRA* — which combines the tax advantages of an individual retirement account with the inflation-hedging potential of gold.
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With Goldco, you can open a Gold IRA*, which can help you diversify your portfolio and protect your retirement.
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3: Your Social Security benefit is set in stone
You probably have more control over your social Security benefit than you think – even if you're retired already.
Here are a few ways you could increase the amount you're eligible to receive:
Retire later: You can start drawing retirement benefits between age 62 and 70 and the [longer you wait, the higher your benefit will be.
Increase your pre-retirement income: Your benefit is based on 35 of your highest-earning years. So if you increase your income before retiring, your SS benefit can increase too.
Check your records: Your benefit amount could be reduced if the SSA has incorrect records of your income. If you find an error in your Social Security statement, request a correction at ssa.gov or call 1-800-772-1213.
Look into family benefits: Check to see if you qualify for additional benefits based on a family member's work, including benefits earned by a former spouse.
4: There's no way to calculate how much you qualify for
It's true you can't predict your exact Social Security benefit far in advance. That's because the amount depends on variables that can change leading up to retirement, including your income, new government rules and the program’s status and fund reserves at the time you start collecting.
It might also be worth considering speaking to a financial expert who can help you put together a portfolio that will empower you to grow your wealth and maintain your lifestyle, no matter your social security benefit.
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5: Social Security benefits are not taxed
Don't assume you'll get to keep all of your Social Security check. In all likelihood, you’ll pay taxes based on your "combined income," which the SSA defines as 50% of your Social Security benefit, plus any other earned income.
If your combined income on your federal tax return is:
between $25,000 and $34,000 as an individual or between $32,000 and $44,000 if you file jointly with your spouse, you can expect to pay taxes on 50% of your benefits.
more than $34,000 as an individual and $44,000 for joint filers, you could pay taxes on up to 85% of your benefits
People who are married and file separately may also have to pay taxes on Social Security, regardless of income level.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
