Myths Abound: Social Security Is Often Misunderstood
Many retirees depend on Social Security as their primary source of income. Each person who collects this valuable benefit is unique in his or her circumstances. How other people have chosen to withdraw their benefits should not be a deciding factor in determining when or how to proceed. Often, people choose to begin drawing benefits early for various reasons, but they must have a full understanding of how this will affect payments for the rest of their lives. Other retirement income should be taken into consideration. Perhaps they have a pension from their job upon which to draw, or an IRA, or they have invested in the stock market. However, if social security will be the primary source of income, considerations should include the increase in the cost of living as they grow older, their health in later years, and major expenses that are related to normal aging. In addition, they should take into account any surviving spouse who may have to rely on it. Postponing benefits for as long as possible will ensure the maximum entitlement.
Myths About Social Security
Myths abound with rumors about social security and the possibility that it may not be around when people retire. Some of the biggest myths are:
- The Social Security fund will be depleted by the time they retire - Fortunately, as long as people work and pay taxes, money will be in the fund.
- The government will cut benefits in order to pay for tax cuts - Historically, people who are already receiving benefits have not been affected.
- Retirees will get back what they put into the system - Actually, there is no dollar-for-dollar match. The more money they earn, the more taxes they pay. The benefit is currently capped at $2,788 per month or $33,456 per year. That amount is generally adjusted annually for inflation, and it may be less than they paid into the system, but if offsets the amount paid to workers who did not earn as much and, therefore, paid fewer taxes.
- Congress can use social security funds to subsidize shortfalls in other programs - The truth is that the social security taxes that are collected daily go into interest-bearing securities and are not a part of the general fund, so it is not likely that the government can use it for any other purpose.
- Social Security is being depleted because of undocumented immigrants - Factually, undocumented persons and their employers pay into the system through payroll taxes, but they are unable to collect the benefits.
- You can claim benefits early at age 62 with a reduced amount and it will automatically increase when you reach full retirement age - The fact is that when you claim benefits early and receive a reduced amount, it will remain at the reduced rate.
The Social Security system is complicated, and it is understandable that people confuse the various programs, the benefits they provide, and who is eligible for what type of benefit. A little online research or a call to the Social Security Administration can help dispel many of the unwarranted ideas and help reassure the public of its ability to sustain itself.
Questions and Answers
Q. Will there be a cost-of-living increase in 2019?
A. An increase of 2.8 percent is projected.
Q. What is SSI?
A. SSI is Supplemental Security Income and helps those who are disabled or blind and have limited sources of income.
Q. How is the monthly payment calculated?
A. It is based on the 35 highest earning years, the age when the claim is made, and the individual’s full retirement age.
Q. Are all divorcees eligible for their spouses’ benefits?
A. All divorcees, who are 62 years of age or older, are unmarried, and their own benefit from their earning years is less than that of the divorced spouse, are eligible if they were married at least 10 years.
Q. Can a divorcee claim the ex-spouse’s benefits if the current spouse is receiving benefits as well?
A. Yes, as long as the marriage lasted 10 consecutive years.
Q. Is the ex-spouse’s benefit affected if the former spouse files for benefits, as well?
A. No, not at all. As a matter of fact, the Social Security Administration takes care of the paperwork, and the ex-spouse does not have to be contacted at all.
Q. How is the full retirement age calculated?
A. The year of birth determines full retirement age and full monthly benefits.
Q. Are Social Security payments taxed?
A. Yes. The amount is based on income.
