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Social Security: Secrets, Myths and Misconceptions

It's easy to be confused when nearly every rule has an exception or layers of options


(Editor’s note: This content is sponsored by Acts Retirement-Life Communities.)

Social Security isn’t the easiest thing in the world to understand. There are endless rules, and it seems like every rule has either an exception or so many options that it’s hard to get a grasp on what’s really going on. It no surprise, then, that myths, misconceptions and secrets surrounding Social Security have all developed over the years. The result: It’s incredibly easy to be completely misinformed when it comes to Social Security.

And that’s a major problem as many people rely on their Social Security benefits to pay for at least some of their basic living expenses. Here are six of the most common Social Security myths that persist today in America:

1. Misconception: You Have to Claim Your Benefits at Age 62

Despite endless news alerts, blog posts, PSAs and email newsletters advising people on the best age to start taking their Social Security benefits, many people still believe that everyone must claim theirs at age 62. That is not the case. Many of today’s retirees are actually choosing to delay taking their benefits in order to increase the monthly payout. And if you do choose to start receiving that monthly Social Security benefit as early as 62, your check will be lower than if you’d waited.

Whether it’s because people believe they have to or they simply can’t wait for the added boost in monthly income, research shows that more retirees start claiming benefits at age 62 than any other age. For some, it’s a strategy that works, but every case is different and others may lose out on money because they chose to take their benefit too soon.

Here’s a number to consider: For every year you delay your Social Security benefits, the dollar amount of the benefit goes up by 8%.

Want to learn how to start collecting Social Security? Read how to apply for and start collecting Social Security. This article reviews the basics of Social Security and at what age you should start collecting.

2. Myth: Married People Who Never Worked Are Not Eligible

Nonworking spouses are indeed eligible to claim benefits. The amount claimed is based on the work record of the working spouse. There are a number of different strategies for maximizing monthly Social Security income between spouses. For instance, the working spouse can claim benefits at full retirement age and then suspend them. That opens the door for the nonworking spouse to put in a claim for spousal benefits, which can be 50% of the amount the working spouse would get if they hadn’t suspended the benefit.

3. Myth: You’ll Never Get Out of the System What You Put In

This misconception is a little more difficult to banish because it seems so plausible. The findings are consistent: Individuals who retire at an average age of 65 do indeed get back what they put in. Studies show that on average, people get more out of Social Security and Medicare than what they paid into the system. As dogged and beleaguered as the system may be, it does still work.

4. Secret: Claiming Early Means Your Benefit is Lower Only Until Full Retirement Age

This is no “little-known Social Security secret.” It’s absolutely false. Claiming your Social Security benefits early will mean your monthly benefit amount is reduced — forever. It does not increase once you reach full retirement age, except to keep up with the cost of living (COL).

If you’ve already fallen victim to this myth, there’s hope. You have the option of suspending your benefit until you reach age 70. Up to age 70, your benefit amount will increase by 8% each year that you choose to delay taking it. The day you turn 70, however, your Social Security benefit will automatically start being paid out to you. There will be no more increases except for COL the annual adjustments.

5. Myth: Your Ex Can Sabotage Your Benefits

Here’s a scary thought: If your ex-spouse claims their Social Security benefit the right way, it could put your own in jeopardy. Good thing this is a total myth.

Your rights to a spousal benefit remain intact, regardless of what your ex may think or want. The only caveat is this: You have to have been married for 10 consecutive years. Also, you may claim your spousal benefits of an ex-spouse only if you have not remarried. And, just as if you were still married, your spousal benefit will be 50% of their benefit once you’ve reached your full retirement age.

And on the flip side, just because you’re claiming Social Security benefits on your ex-spouse, that doesn’t mean it will have any effect on their benefit.

6. Misconception: Your Social Security Account is Like a Bank Account

When you pay into the Social Security system, the money goes into a big, communal “pot” — not your own account. When you retire, your benefit check is drawn on that general “pot” of money, not on any personal account. Social Security is by no means anything like a bank account. The people working today are the ones footing the bill for people receiving benefits. When you were working, you were financing the benefits of retirees at that time. It’s a “pay-as-you-go” system, not a bank account.

People who believe this myth are confusing Social Security with a pension, an Individual Retirement Account, or as we said above, a bank account. These are not the same things and are based on a completely different model of payout.

The Lesson Here

The bottom line is that the longer you wait to start receiving Social Security benefits, the larger each check will be. But once you reach age 70, the benefit starts automatically. Plan wisely and you could end up strategizing your way to more money.

Want more information on Social Security and retirement living? Check out these articles by Acts Retirement-Life Communities:

What is the Average Cost of an Independent Living Community?
What Do I Need to Retire Comfortably?
Financial Planning Advice

By Acts Retirement-Life Communities

Acts Retirement-Life Communities is the largest not-for-profit owner, operator and developer of continuing care retirement communities in the United States. Headquartered in suburban Philadelphia, Acts has a family of 23 retirement communities that serve approximately 8,500 residents and employ 6,200 in Pennsylvania, Delaware, Maryland, North and South Carolina, Georgia, Alabama and Florida. For more information about Acts visit actsretirement.org.

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