The Sky Is Not Falling ~ Debunking Social Security Myths October 6, 2014

Hello friends, Happy Money Monday 

Several months ago I attended an AARP Seminar and one of the topics of discussion was collecting Social Security benefits.  A few women in the audience were concerned because they believed that when the time came for them to collect Social Security, the system would be bankrupt. 

The speaker tried to reassure them that that would not be the case, but one woman was not totally convinced. 

So let’s debunk some of the other myths to make sure the sky is not falling.

Myth 1: Social Security payments are based on your last 5/10/15  years of work — False

Your Social Security payments are based on your lifetime average earnings. For retirement payments, SSA uses your best 35 years of work, indexed for inflation. (Fewer years are used for mid-career death or disability.)

You can get a Social Security estimate by signing up at ssa.gov/myaccount

Myth 2: You should postpone Social Security to get the most retirement income. —Maybe so, maybe no.

Taking your retirement payments later, up to age 70, gives you a higher monthly payment. But will you survive long enough to reap the benefit? Will you drain your savings while waiting for Social Security to start, short-changing your later years? If you withdraw from tax-deferred retirement accounts, will you pay more in taxes than you would if you drew Social Security instead?

Myth 3: You have to die for your family to get Social Security on your work record. —False

Your spouse and children (and yes, your former spouse) can be eligible for Social Security, even while you’re alive. Make sure to take family benefits into account in your retirement planning.

By the way, it is true that your family can get Social Security if you die. Just don’t wait that long!

Myth 4: If you work and earn over $15,000 while on Social Security, your payments stop. – False

It’s true that there’s a threshold earnings level set every year; it’s $15,120 in 2013. What’s false is that if you earn anything over the threshold, your Social Security will stop.

First, the threshold applies only to those under Full Retirement Age (FRA, currently 66). Once you are over FRA, you can work all you want and still get full Social Security.  You’d have to earn quite a bit, perhaps $30,000 to $50,000 to lose all your Social Security.

Finally, remember that only work income — wages or self-employment earnings — count against your Social Security. Pension, interest, dividends, capital gains, etc. don’t count.

Myth 5: Social Security is losing money/is broke. — False

Social Security is still running a surplus and banks the extra money they bring in each year, so their reserve funds are growing.

Counting all three revenue streams shows SSA running a surplus ($54 billion in 2012), and surpluses continuing until 2020.

What happens after 2020? SSA’s reserves provide full payments until 2033. After that, tax revenue alone will provide about 75% of needed funds. Yes, Congress will have to increase revenue and/or cut benefits before then to close the gap.

The bottom line is that you’ll make better retirement decisions with accurate information. Best wishes for an abundant retirement, and as always, keep on planning.

Information reposted from: www.marketwatch.com

Do you have questions regarding Social Security Benefits?

Stay Blessed ~ No Stress in 2014

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