Get to know your Social Security history, benefits, and eligibility to fully maximize your Social Security retirement plan.
In this article:
- Why Understanding Social Security Benefits Is Important
- Social Security Problems Encountered by Retired Workers
- What Is The Purpose of Social Security?
- A Brief History of Social Security
- How Social Security Works
- The Payment System
- Notes on Eligibility
- The Claim
- Key Social Security Terms to Understand
- Top 10 Most Important Facts (and Tips!) About Social Security
- Eligibility Requirements
- Ask Beau! Your Social Security Questions Answered…
- Common Myths Surrounding Social Security
- Here’s What You Can Do Next!
Understanding Social Security History, Benefits, & Eligibility
Why Understanding Social Security Benefits Is Important
There’s an urgent situation unfolding with Social Security.
According to the Social Security Administration, Social Security benefits are the most important source of U.S. retirement income.
Unfortunately though, only about 3% of retirees are able to collect the maximum Social Security benefit.
With over 500 different filing strategies out there, how do you know which one is best for you?
This question is one that torments millions of people every year.
That’s precisely why I’ve assembled a team of researchers to get to the bottom of the most important steps, facts, and strategies that you need to know.
Because this is your retirement, after all. The decisions you make when claiming Social Security can affect you for the rest of your life.
But finding the correct filing strategy is extremely complex — and, unfortunately, many Americans don’t collect everything they deserve.
Even financially savvy people get it wrong.
Heck, I’ve seen it firsthand!
When I was fairly new in my financial advisor career, my mentor pulled me aside and told me something I will never forget.
He said “Beau, I messed up. I accidentally shortchanged my wife.”
I was not expecting this candid confession, so naturally, I asked him to explain.
His explanation caused me to question everything about our Social Security system.
He said, “I didn’t properly plan the best strategy to file for my situation. I simply overlooked the need to customize my Social Security strategy. I just went with the logic of filing at 62 years old, which is what most people do. This will end up costing my wife tens of thousands of dollars in total retirement benefits since she will most likely outlive me by many years. I don’t know how I got this decision so wrong.”
Wow, I was simply in shock.
Here was one of the most brilliant financial minds I have ever met.
He knew more about finance than almost anyone I knew.
He was my mentor.
Yet, even this brilliant guy was susceptible to making a very bad decision on his Social Security filings. It was at this very moment that I realized I wanted to learn all I could about Social Security.
I want to help others navigate this crazy complex world.
This was one of the best decisions I could have made.
Social Security Problems Encountered by Retired Workers
Flash forward 16 years, I have had the opportunity to help over 3,000 people discover their true relationship to money. But there’s more work to be done. And that’s why I’m publishing this free guide.
I want you, and every hard-working American, to understand how to get what you deserve.
Many of my former clients benefited greatly from having someone to coach them through their Social Security benefits.
I’m sure you’ve heard the saying, “Knowledge is power.” Well in the case with Social Security, knowledge could mean more money for you and your loved ones.
Knowing what, how, and when to file for your Social Security eligibility gives you the power to maximize what you can get for your pension.
Here’s an example of what I mean:
Take Cindy (name changed for privacy).
She came to me one day at the age of 64. Her husband passed away 4 years prior and left her with very few assets.
This is a very common scenario as women will typically outlive their spouses.
Cindy was in a very rough spot. Her annual income was only about $17,000 per year. This is barely enough to get by with the cost of living today.
Anyway, after a bit of digging, we realized that she could file a restricted application and begin taking a spousal benefit on her late husband’s Social Security.
This would provide her extra income to bridge the gap until her own benefit kicked in.
The truly sad part about this story is Cindy could have been collecting this spousal benefit at age 60. Cindy missed out on 4 years of extra income because she didn’t know any better.
This is one of the reasons I made this guide: To provide a glimmer of insight into how Social Security works.
The Social Security Administration provides an online handbook that is over 800 pages long. This makes it extremely complex to find the right information for every situation.
This guide is my attempt at condensing this information into some of the most valuable takeaways.
Let’s get started.
What Is The Purpose of Social Security?
To answer this question, It is important to have a good understanding of what Social Security is and what it is not.
The thing most people don’t realize is Social Security was never designed to be a major source of retirement income.
When President Franklin D. Roosevelt signed the Social Security Act into law he said:
“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life… we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
The keywords here are “insure” and “some,” which provides a crucial distinction into what Social Security was meant to be.
It is an insurance policy to provide partial protection against poverty or job loss.
Put another way, this means Social Security was only meant to provide a minimal amount of security for people that would otherwise be in poverty or incapable of work.
Social Security has evolved over the years to become something that most retirees rely on to survive.
According to a recent study, Social Security accounts for over 50% of the average retiree monthly income.
This is a rather frightening statistic.
This means that over 50% of a typical retiree’s income is derived from something that is not meant to be a major source of income.
It is important to first understand how this happened. Armed with this knowledge, you will be better equipped to prevent this from happening to you.
To start let’s take a look at the history of Social Security and some of the major milestones achieved along the way.
A Brief History of Social Security
If Social Security were not mandatory, it is highly likely that only a few will ever participate.
It is not because people are ignorant about its benefits, but rather because people have a short-term view of the future. Only a handful of people think about investing money for long-term financial stability.
The idea of not being able to use part of their hard-earned money for 10 to 20 years seemed illogical or impractical for some. This is especially true for those who rely heavily on their weekly or monthly paychecks for expenses and payment of debts.
People would rather enjoy the benefits now, as there is a pervasive attitude among many individuals that they will remain fit to work.
When they find themselves reaching old age and unable to work, they use up all of their hard-earned money and end up buried in debt. Social Security and pension plans helped ease this financial burden.
But where did Social Security come from?
Who started it and why is it that many countries in the world made it mandatory?
In the United States, Social Security is not as old as you might think, in the sense that it has not even been existence for a hundred years.
It was only signed into law in 1935, an important year, by President Franklin D. Roosevelt. (1)
The years prior to that were marked with dark financial experiences.
In 1935, the United States was just recovering from the Great Depression, an event that lasted for more than a decade.
The Great Depression started in 1929 when the stock market crashed, causing a catastrophic economic downturn, which resulted in half of the country’s banks throwing the towel, and as much as 15 million people unemployed.
In 1935, six years after the stock market crash, many people still did not have jobs.
As such, it caused alarm, most especially so for the elderly people who have retired and whose investments were wiped out because of the Great Depression.
These retirees lost everything. They lost their savings, their investments, and had nothing.
The government had to act, and so the Social Security System was born.
It is a program that was intended to secure the insurance of older people in the workforce by the time they retire, and it’s run by the government to ensure that the money placed in it is protected.
Contrary to what most people know, the SS does not only provide for retirement, as the original act was also intended to provide for dependent children, and for those who are unemployed.
Individuals who have no jobs could get an unemployment check.
During its first years, SS was paid in lump sums. But in 1940, a monthly payment scheme was introduced, which made it easier on the pocket.
People who had jobs were obligated to pay it, and they will have to pay until they retire. The money they paid was put in a government trust fund that earned interest.
The government used it in legal ways to earn money. In return, the people who paid for it can receive checks by the time they retire until the time they die.
How Social Security Works
When you work, a part of your earnings is taken as what may be viewed as a Social Security tax. The payments then get pooled together to be used for payouts to those who are eligible.
The Social Security System has three main functions today. These are:
You can retire at age 62, while some may opt to retire at age 70.
Only those who have met the specific contribution requirements are eligible to get retirement benefits.
Once you retire, you can either get a lump sum or get a monthly check from the government, which should be enough to subsidize the basic cost of living.
2. Death Benefits
The family of a deceased individual who has made a contribution to the Social Security System will receive a lump sum.
In some cases, the children who were left behind can receive checks on a monthly basis.
Workers who have made contributions can get checks should they be unfortunate enough to suffer from debilitating diseases or accidents that render them disabled.
So, how does it work? What are the cogs and gears that run this national wheel of finance?
The Payment System
To start with, you need to see your contributions to Social Security as a tax.
And rightfully so, it is called the FICA or the Federal Insurance Contributions Act. (3)
It is an amount of money that is levied against you and your employer by the government, the cost of which is 12.4% of your earnings.
This FICA tax is shared between you and your employer. You pay 6.2%, and your employer pays the same amount.
If you earned $1,000 for the month, 6.2% of that is $62.
This amount will be deducted from your $1,000, and then the employer has to match that amount, which he has to deduct from his own earnings.
Once all the money is pooled, parts of it are invested in bonds, and the government is in charge of ensuring that these investments earn interest.
Making interest on the money is important because the Social Security system cannot operate 100% as a pay-as-you-go.
When we say pay-as-you-go, it refers to a system where the money that is disbursed to the retirees come directly from the contribution of the current workforce.
In short, if you pay $62 per month as a contribution, a retiree somewhere will receive that $62.
This model is bound to fail, as there will come a time when the workforce is not sufficient enough to pay the actual money needed to fund the benefits of the existing retirees.
Today, the SSA or Social Security Admiration department reports that 85% of the contributions go to the retirees or to the families of those who died, and the other 15% is allocated to those who have disabilities.
Notes on Eligibility
Not everyone who paid is eligible to make a claim.
There is a certain age and requirement before you become eligible to get your retirement benefits, death benefits, or disability benefits.
Claiming a death benefit is much easier, as you only need to be the spouse or the child of the contributor who died.
Disability, on the other hand, has stringent requirements by the SSA to prove that you cannot work.
At a minimum, you should meet the required number of credits to be eligible for a claim.
You can receive a maximum of four credits per year, which is one credit for every earning equivalent to $1,300.
Those who were born from 1929 onward must have a minimum of 40 credits to qualify for a claim.
What this entails is that you need to have made contributions for ten years.
Although it only takes ten years to qualify, you cannot just go the SSA and make a claim.
The minimum age to claim a retirement benefit is 62.
Also, you must know that claiming your retirement benefit at the early retirement age will also make your benefits smaller.
The government encourages people to work longer. And because you work longer, you will also contribute longer.
And the more money you put in the SS coffers, the more money it can use to aid those who are retiring.
At age 62, you can only get about 70% of your insurance premium. If you choose to retire at the age of 65, you are eligible to get 86.7% of it.
For every year that you do not claim your SS retirement benefits after the age of 65, the government will add 8% to your benefits, but this is maxed out at the age of 70.
What this means is that it makes no financial difference if you retire at the age of 70 or 75.
Key Social Security Terms to Understand
Here are some important terms that you must know.
This part will help you understand what the terms mean, and the definitions can expand your financial vocabulary.
1. Application for Benefits
This refers to an application for retirement, death benefit, or disability benefit. You can do this in an SSA office or online. An appointment is not required, and you can drop by anytime. (4)
2. Average Indexed Monthly Earnings (AIME)
This is a calculation of how much you should earn for your benefits.
The way it works is that the SSA counts 35 of your highest earning years until you hit the age of 60, and then it is averaged to be able to get a monthly value for your retirement benefits. (5)
Social Security pays five types of benefits. (6) These are:
- Retirement – The monthly payout made to retirees.
- Disability – The financial support given to individuals who can no longer work due to disabilities.
- Medicare – A health insurance program for people above 65 years of age.
- Survivors – The money paid to the dependents of a contributor who has passed away.
- Supplemental Income – This is given to disabled adults and children who need financial support.
4. Cost-of-Living Adjustment (COLA)
This term is a measurement of how much money should be added to your benefits to give you more buying power.
This is important because the price of goods inflate over time, and the money you contributed 30 years ago will not have the same buying power today. (7)
5. Delayed Retirement Credits (DRC)
These are credits that you earn if you do not retire at the age of 65.
For every month that you do not make a claim, you earn 2/3 of 1%, which is essentially 8% interest or more credits per year. (8)
6. Early Retirement or Early Retirement Age
The age considered as early retirement is 55.
However, this only applies to those who were employed in civic duty, such as those in the military or police force.
If you are a civilian, the early retirement age is 62. (9)
7. Earnings Record
This refers to a record of how your pay is calculated.
The end result is your net pay. From your gross income, federal and state taxes will be withheld, and then your SS or FICA tax will be deducted, the final result of which is your net pay.
This is important to know so you understand how your earnings are split to pay different government responsibilities. (10)
8. Family Benefits (Dependent Benefits)
These are benefits distributed to the dependents of qualifying and contributing member of the SS.
These benefits are issued to children, spouses, grandchildren, and children with disabilities.
There are limitations to these benefits, and there are also pre-qualifying conditions. (11)
9. Family Maximum
This one refers to the maximum benefit a family can get if the contributing member is disabled or deceased.
There are four bend points, but the maximum cannot exceed 178% of the contributor’s Primary Insurance Amount. (12)
10. Federal Insurance Contributions Act (FICA Tax)
FICA tax is the amount that is deducted from a member’s salary after the federal and state taxes were deducted.
The amounts are 6.2% for social security and 1.45% for Medicare.
The employer also needs to pay 6.2% of your earnings, but this is taken out of the employer’s pockets. (13)
11. Full Retirement Age (FRA)
The full retirement age varies because Congress changes the age from time to time.
If you were born after 1937, the full retirement age is 65.
You can still retire at age 62, but the amount of money you will get will be smaller than what you would have gotten if you delayed your retirement claim. (14)
12. Maximum Earnings
This is the maximum amount of earnings that the government will charge for FICA.
It changes from time to time. As of 2019, the maximum taxable earnings is $132,900. If you think about it, 6.2% of that per year is $8,239. (15)
This is a government-run medical coverage, which is primarily intended for low-income earners. The benefits include ten of the required medical benefits stipulated in the Affordable Health Care Act. (15)
This is a program that runs as part of the Social Security System. Employees pay this at 1.45% of their monthly income.
The Medicare program provides health care benefits mostly to people who are above 65 years of age, or people with disabilities. (16)
15. Old Age, Survivors, and Disability Insurance (OASDI)
Basically, this is the legal or official name of the social security program in the US. But what many people know and use as the proper terminology is Social Security. (18)
16. Retirement Earnings Test
This is a test done to people who claimed retirement benefits before the age of 65, or before the full retirement age, and yet continued to work and earn money above a government-set limit.
What it does is it reduces your SS benefits because you already claimed Social Security when you could have contributed more.
This reduction will be offset and given back to you after you reach the full retirement age. (18)
17. Supplemental Security Income (SSI)
This is a financial benefit distributed to those who have disabilities or those who have no income. However, this not funded by SSA money; it is funded by federal taxes. (19)
18. Survivors Benefits
These are financial benefits given to the beneficiaries of members who passed away. The money may be disbursed to children, widows, or ex-spouses of the deceased member. (20)
Top 10 Most Important Facts (and Tips!) About Social Security
Here, we will explore some important facts about the Social Security System.
This should douse the fire of the myths you may have heard from acquaintances or friends, and then understand the benefits and impact of the Social Security System to society.
1. Social Security Touches More People than Just About Any Other Federal Program
Social Security is the only branch of the government that provides guaranteed income to those who invested.
Unlike private retirement plans that come in the guise of mutual funds, this is not subject to risks of getting dissolved.
According to Pew research (21), there were 51 million Americans receiving benefits as of 2014.
This number includes those who are sustained by the program for their disabilities, old age, and death.
The disbursed funds cost $848 billion.
2. Social Security Is, and Always has Been, an Intergenerational Transfer of Wealth
As you contribute, the money you deposited is invested in government bonds.
The funds are managed, and they are distributed to the older generation, who, during their working years, also paid for the retirement benefits of the people before them.
By the time you hit retirement, your children will continue building the assets of the Social Security System, and this process will continue to work for as long as there are aging people and people young enough to contribute.
3. Right Now, Social Security Has Plenty of Assets
As of 2019, the asset of the SSA is around 3 trillion US Dollars. (22)
In 1986, the asset reserves were only at $47 billion, but it is now sitting at $2.894 trillion.
This is important, as the Social Security system is not a business per se.
It does not have huge profits, and therefore it must be diligent in keeping the assets intact.
If these assets deplete, it just means that the time would come when there won’t be enough money in its coffers to sustain the promised benefits.
And if this happens, the elderly who invested will have no funds to claim.
4. Since 2010, Social Security’s Cash Expenses Have Exceeded Its Cash Receipts
It is true that the SSA had deficits to the tune of $74 billion. (21) In fact, it is expected to lose more.
It is important to note that if the SSA depletes its money, it will run out of liquid assets for disbursement to those who are eligible for benefits.
As mentioned earlier, the SSA uses the money for bonds. As such, the money is earning interest. Even if the SSA spent more money than what it charged, the interest from the bonds can cover for this deficit.
Now that you know this, it is imperative that you contribute to the coffers by working.
You must also strongly consider delaying your retirement, as it gives the SSA better leverage to use the gap to generate more interest from the bonds.
5. Social Security’s Combined Reserves Likely Will be Fully Depleted by 2034
This is an ongoing challenge that the SSA is facing.
From a numbers perspective and based on projections of financial disbursement, the funds will be depleted by 2034.
This applies to both the disability funds and the old age funds.
Why is this happening?
It is a combination of two things—early retirement and low tax returns. If people are unemployed, they are not contributing to the funds.
And as you know today, many people are opting to create their own businesses online, and not register themselves to the SSA.
This creates a serious problem because if a huge chunk of the population is now gearing away from the traditional brick-and-mortar type of employment, they are not becoming a part of the SSA ecosystem.
The funds that are available today are those that were saved from years ago—from people who are now retired.
To solve this issue, Congress must enact new laws that will allow the SSA to collect more funds.
Self-employed individuals must also be proactive in making contributions, or the social security system will crumble.
People who are 55 years old now will be able to get their full benefits by the time they retire. Unfortunately, younger workers will be getting a 23% reduction from their payouts because of the challenges the SSA are facing.
6. Social Security Has a Mulligan Built in Known as Form SSA-521
If you regret taking benefits early, you can undo your application within the first 12 months and repay every cent you’ve received.
What this means is that if you claimed for early retirement and found out that you could have gotten more money if you retired late, you can still change your mind and let your retirement funds grow up to 8% per annum until you retire at 70.
But there is a catch.
If you retired at 62, you must return all the retirement benefits to the SSA. And you must do this within 12 months.
If you do, it would look like as if you did not retire at all. What you can do is to work again, and contribute more money, or you can just wait eight more years so you can enjoy more money by the time you hit 65 or 70.
7. Ex-spouses Can Lay Claim to a Social Security Benefit Based on Your Work History as Long, as You Were Married for at Least 10 Years
This is important for people who qualify for the benefit.
To qualify, you must have been born before Jan 1, 1954. (24) Also, you must not have remarried, and that you were married to the former spouse for at least ten years.
By the time you make a claim, you must still be single, and stay single for as long as you are receiving benefits.
If you get married while getting benefits, the government will stop disbursing funds to you.
So what do you get? You can get up to half of what your ex-spouse would get by the time he or she hits the full retirement age according to his birth year.
The good thing about this is the ex-spouse will still receive his full benefits.
It is not like as if the benefits will be split in half.
Take note that this amount will be reduced if you file a claim before you hit full retirement age.
And remember, your ex-spouse must also be at least 62 by the time you make a claim.
8. Social Security Is Primarily Funded by the Payroll Tax
This is true.
However, do not confuse this with the federal and state taxes.
As mentioned earlier, the SSA is funded by what is called the FICA tax. It is a separate tax that is paid to the SSA, which is also used for a specific purpose.
This is important to know because some people think that the federal and state taxes help fund the Social Security system.
Now that you know that it doesn’t, you will begin to understand that if people stop paying the FICA tax, the SSA’s asset reserves will deplete over time.
As discussed, the money that is being put in today is what is being used to fund the retirement of the retirees of this generation.
If people today will stop paying the FICA tax, or if this is not increased, there will be no fund left to pay for the older generation.
9. Social Security Benefits Do Indeed Have a Monthly Cap
The maximum monthly check you can receive for retirement is $2,861.
This, however, only applies to those who paid the maximum contributions. The caveat is that it should also be consistent for the last 35 years. (25)
On average, you can receive as much as $1,461 per month.
So while there is no hard monthly cap, there is a maximum amount that you can contribute per month, and this monthly limit on your contribution is what makes up the calculation to how much you can earn for your benefits.
10. You Aren’t Entitled to Social Security Benefit — You Have to Earn Them
Not everyone can claim Social Security.
Only those who have met the credit contributions can make a claim. What this means is that those who just paid a few years will not be eligible for the benefits.
The mandatory requirement is that you must have paid at least 40 credits, which is equivalent to ten years of consistently paying your dues.
The eligibility requirements for filing a claim vary from one benefit to another. Here, we will provide a quick overview for each one.
You would qualify if you are at least 62 years old, and if you have paid 40 credits.
Take note that the full retirement age varies. Those who were born in 1937 can retire in full at the age of 65, while those who were born in 1960 and later can enjoy the full retirement age at 67.
This covers a long list of diseases and conditions. Generally speaking, you must meet the definition of disability as stipulated by the SSA.
First off, you must not be earning more than $1,220 per month.
Your condition must also be so severe that it prevents you from doing basic work such as walking, standing, or lifting objects. It also includes mental disabilities such as failure to remember.
You must know that to be eligible, you must have been disabled for at least 12 months. (26)
To apply for survivor benefits, the worker or the contributor does not need to have paid 40 credits.
This benefit can only be given to the children of the contributor, or the surviving legal spouse. (27)
The person who can receive these benefits must be the widow, a divorced spouse, an unmarried child younger than 18. Different situations apply to different rules.
It is best to speak to a representative from the SSA to get the full details of survivor benefits according to your marriage situation, and the age of the children.
Medicare is a branch of the SSA where contributors also pay.
This is on top of the FICA tax, and it is primarily used as health insurance for members who have reached the age of 65.
It is also accessible by young individuals who have disabilities, and those with end-stage diseases such as kidney failure, those that need dialysis, and have renal diseases.
Like the Affordable Health Care Act, it is split into segments like:
- Part A – Hospital Insurance
- Part B – Medical Insurance
- Part D – Prescription Drug Coverage
- Part C is a comprehensive plan that is considered as an all-in-one package. (17)
Ask Beau! Your Social Security Questions Answered…
Now it is time to answer some of the most commonly asked questions about Social Security. (28)
1. Is Social Security for Retirees Only?
No, the income that the SSA collects from contributors is used for retirees, for people with disability, and the survivors of members who passed away.
2. How Much Money Will I Get for My Retirement?
The amount of money you get is calculated by using the highest taxable income you earned in FICA terms for the last 35 years. This will be averaged to determine your monthly retirement benefits.
The highest, however, is just a little above $2,000.
3. Who Is Eligible for SS Benefits?
Everyone who has accumulated 40 credits is eligible. The exemption here is the survivors of a deceased member.
The person who died must have at least six credits for his dependents to qualify.
4. When Do I Get My Money?
You can retire at the age of 62 onwards. The truth is, you can retire at any age you want, but you will not be paid until you hit 62.
5. I Want to Work After Retirement, Can I Do This?
Yes, you can do this. But if the SSA finds out, your benefits will be reduced, until such time you stopped working. Only then will you get the full benefits of your retirement coverage.
Common Myths Surrounding Social Security
Despite the various references you can find about the retirement plan everywhere, many people still encounter and believe Social Security myths.
Myth #1: It’s Better To Take Social Security Benefits Early
This is actually partially true. It’s true SOME situations are better to take benefits early.
The key word here is SOME.
Just like it is equally true that other scenarios are better to take benefits later. This is not a cookie cutter type of benefit.
You need to evaluate your personal circumstance case by case. It wouldn’t hurt to also discuss with your financial planner prior to any decisions.
Myth #2: You Must Claim Your Social Security Benefits at 62
This is one of the most dangerous myths floating around today.
This is actually the minimum age you can start receiving benefits. (You will only receive 75% of your benefit at this time).
If you do not absolutely need to start collecting at age 62 it would be much better to wait and allow your benefit to grow.
Again, consult your financial planner as to when the best time to collect is for your situation.
Myth #3: I’ll Receive Full Benefits at 65
This one is also false.
The age when full benefits are available is actually 70. Again, it is dangerous to just assume the typical “retirement age” and Social Security benefits age are the same.
Myth #4: Once I Start Benefits, I Can’t Work Anymore
You can work but need to be aware of how it affects your social security benefits. Nolo.com says it best:
“If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit. Once you reach full retirement age, there is no limit on the amount of money you may earn and still receive your full Social Security retirement benefit.”
Myth #5: The Money You Pay Into the System Is the Money You Receive from It Later
This again is another inaccurate assumption.
Many people think that when they pay into Social Security it goes into a special account with their name on it. This couldn’t be further from the truth.
Instead, it goes into a massive pool to be used to pay out current benefits. The ramifications of this can be massive if you are expecting this money to be yours.
Myth #6: Social Security Benefits Are Not Taxable
While this is typically true, there are some instances where up to 85% of your benefits could be liable for taxation.
This could be the case if you have other significant income.
Also, as of 2018 there are currently 13 states that also tax Social Security benefits.
- New Mexico
- North Dakota
- Rhode Island
- West Virginia
It would be wise to consult your tax professional on how taxation could potentially affect you.
Myth #7: Social Security Is Designed to Replace Most of Your Pre-Retirement Income
This is the most dangerous myth.
Social Security was never designed to replace pre-retirement income. It was designed to provide supplemental benefits in the form of money and medicine to the elderly at a time when they were unable to work.
Relying solely on Social Security in your golden years will be tough.
Here’s What You Can Do Next!
Every working American is mandated to have a Social Security number and make payments. Your payouts also depend on how much you set aside for this service.
You can choose to pay more for Social Security benefits or invest in other retirement plans. If you have extra income, then do so.
When making decisions, think about how they can affect your family in the long run.
Now that you’re equipped with additional knowledge about Social Security, you can finally make informed decisions for your own economic security after retirement.
What other topics do you were not included in this Social Security history and benefits guide? Let me know in the comments section below!
- Pros of Social Security | How To Get Guaranteed Income
- The Secret To Social Security Success | Social Security Strategies
- What Is A Brokerage Account
- Lawyers.com – Social Security: Why It Was Created and How It Works
- History – Great Depression History
- The Motley Fool -How Does Social Security Work?
- Social Security Benefits Application Form
- Investopedia -Average Indexed Monthly Earnings (AIME)
- Social Security Benefits
- Investopedia – COLA
- Forbes – Ask Larry: How Are Delayed Retirement Credits Earned?
- NASI – What is the Social Security Retirement Age?
- The Balance Small Business – How an Employee’s Pay Stub Is Created and Used
- Investopedia -A Guide to Social Security Dependent Benefits
- Social Security – Family Maximum Benefit
- BizFilings – Employers’ Responsibility for FICA Payroll Taxes
- Social Security – Benefits Planner Retirement
- Social Security – Benefits Planner
- Medicare – What’s Medicare?
- Investopedia – OASDI
- SSA – Retirement Earnings Test
- SSA – Supplemental Security Income
- SSA – Survivors Benefits
- SSA – Social Security Income, Cost, And Asset Reserves
- Pew Research Center – 5 Facts About Social Security
- The Balance – Social Security Benefits for an Ex-Spouse
- Investopedia – What is the maximum I can receive from my Social Security retirement benefit?
- SSA – Benefits Planner: Disability | How You Qualify
- SSA – Benefits Planner: Survivors | If You Are The Survivor
- CNN Money – Ultimate Guide to Retirement