If you’re like many retirees Social Security checks will account for a large portion of your retirement income. But how well you understand the ins and outs of these entitlements could make a big difference in how much you receive over your lifetime.
With more than 10,000 Baby Boomers turning 65 each day in the U.S., we know how important it is to keep our community informed and educated when it comes to Social Security. Bradley Vey, our Investment Advisor Representative, has achieved the National Social Security Advisors certificate from the National Social Security Association LLC and is our resident Social Security expert.
The NSSA certificate promotes advanced Social Security education providing Bradley Vey with the knowledge to counsel clients on the best way to claim Social Security benefits in order to optimize Social Security income. In fact, only 1% of advisors have gone through this extensive training and achieved this certification.
Before you make your decision on claiming your Social Security benefits, let’s clear up five of the most common myths and misperceptions about Social Security.
Myth #1: You must claim your Social Security benefit at age 62.
Some people believe that you must claim your Social Security benefits at age 62. This is a myth; 62 is the earliest age that you can claim your benefit, but it’s not the only age.
Your base benefit is calculated based on your “full retirement age” (FRA). This is calculated by the Social Security Administration based on your average indexed monthly earnings during the 35 years in which you earned the most.
If you claim any time 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. That means you may receive a lot less monthly retirement income, every year, for potentially several decades.
You might think that you are not going to live that long of a life, but many individuals do. According to the Society of Actuaries, of people age 65 today, 25% of men will live until 93 and 25% of women will live to age 96.
Myth #2: Your monthly Social Security benefit could be reduced or denied if your ex-spouse claims Social Security a certain way.
False. There are a lot of things an ex-spouse could do to complicate your life, but Social Security is off limits.
Your ex has no influence over your benefits. If you have an ex-spouse, you might be entitled to spousal benefits as if you’d remained married. But you or your ex-spouse claiming this potential benefit won’t reduce or affect the benefits of the other person in any way.
Note: If you were married for 10 consecutive years and have not remarried, you are entitled to either your own benefit—or 50% of your ex’s Social Security benefit, whichever is higher—once you reach your FRA.
Myth #3: The money you pay into the system is the money you recieve from it later.
Some people assume that when money is removed from their paycheck, it goes into an account expressly for them — growing in value over time and provide them with income in your retirement.
That’s not the case though, when you pat into the Social Security fund, you aren’t depositing your money into a governmental savings account. Your funds are actually distributed to the retirees currently collecting their benefits. So your contributions are supporting others, and when you retire your benefits will come from the earnings of those working.
The amount you get out of Social Security will not equal the amount you put in. Your payments are based on a combination of your earnings history and the age at which you claim benefits.
Myth #4: You are likely to be disqualified from collecting your Social Security benefits.
Don’t worry about getting to retirement only to end up disqualified for benefits. It is more likely to accidentally ‘miss out’ on full benefits than it is to be disqualified for Social Security. This is why, proper planning around life events and claiming is vitally important when claiming Social Security.
Myth #5: You can wait until retirement to think about your Social Security benefits.
Long before you retire, try to learn about the Social Security benefits for which you are eligible.
Learning more about Social Security benefits can help you make more effective financial planning decisions and maximize your Social Security income. For example, like we talked about earlier in this blog post, you might be eligible for your ex-spouse’s benefits, yet not even know it! You can also earn a bigger Social Security check simply by delaying retirement beyond your full retirement age.
Too many people overlook this step! To learn more about our upcoming educational Social Security events click here. Or book a complimentary consultation with one of our experts by clicking here.
Myth #6: You can make an informed decision on your own.
The difference between a good and bad Social Security claiming decision can mean a huge difference in lifetime benefits. Consult both the Social Security Administration’s website and a financial advisor like our very own, Bradley Vey, who can run through your options.