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5 Social Security Myths

Busted

You’ve probably heard a lot about Social Security — it’s an important topic, particularly for those of us nearing retirement — but was everything you heard actually true? Maybe not. Quite a few myths around Social Security have made their way into the popular consciousness over the decades. Could they be holding you back from getting the benefits you deserve. We’re debunking some of the most pervasive.

Myth: Your ex-spouse could control your Social Security benefits

Here’s how ex-spousal benefits work: If you were married for at least a decade, have been divorced for at least two years, and your spouse is age 62 or older, you can file for spousal benefits based on your ex-spouse’s record — as long as you are currently unmarried. You can do this even if your spouse has remarried. “As long as your ex is age 62 or above, you’re entitled to this benefit whether they’ve filed for Social Security or not. So they have no way they can control your benefits once that two year time span has passed,” says Jim Blankenship, a fee-only certified financial planner from in New Berlin, IL. If your ex has passed away, you’re also eligible for a survivor’s benefit as long as you were married for a decade or more.

Neither type of benefits has anything to do with how many exes your spouse may have, or their current marital status. “It’s not like there is a finite pool of money to go around,” Blankenship says. “If your spouse has three exes, all of whom they were married to for 10 years or more, each of the exes will be entitled to the same amount of Social Security benefits.”

Myth: The work you perform after you hit 62 doesn’t get counted on your Social Security record.

“Earnings at any age — whether you’re 75 or 95 — will be counted on your Social Security record.” clarifies Blankenship. “Quite often, folks who have continued working up into their 70s are actually earning greater amounts than they did earlier in life, and this can have a significant positive impact on their Social Security benefits going forward.” This is because the Social Security benefits you’re entitled to get recalculated every year. Note that only wage earnings from a job will boost your Social Security earnings — income from investments don’t count.

Myth: You must file for Social Security benefits if you want Medicare coverage at 65

Some people think that Social Security benefits and Medicare are tied together, possibly because you can claim both in your mid-60s. But that’s not true. You can be on Medicare at 65, but not be taking Social Security benefits. Likewise, you can receive Social Security benefits at 62, but you won’t be eligible for Medicare yet. What is true is that many people may find it easier to pay for Medicare once they’re drawing on Social Security, because Medicare premiums are automatically withdrawn from Social Security. “But if you aren’t getting Social Security benefits yet, no worries, you’ll just get a monthly bill for your Medicare, and you’ll pay it just as you would any other insurance premium,” says Blankenship.

Myth: Social Security benefits are not taxable

Social Security is definitely taxable, but those who make too little in a year won’t see a tax bill. For example, if you make less than $25,000 as a single person, or less than $32,000 as a married couple — you’re off the hook for taxes. If you make up to $34,000 as a single person or $44,000 as a married couple, then up to 50% of your Social Security is taxable. Unless you plan to live very modestly in retirement, expect to be taxed on your benefits. “Avoiding taxes on Social Security can be done, but it’s not very common because the thresholds are so low,” notes Blankenship.

Myth: I should claim Social Security as soon as I’m able, or I’ll lose money.

Many people may think, I could die tomorrow, so why not claim my Social Security benefits now? But for every year you delay claiming Social Security benefits, you can increase your earnings by about 6% to 8% per year.

Olivia S. Mitchell, Director of the Pension Research Council of the Wharton School at the University of Pennsylvania, warns against the so-called “break-even approach.” The approach, rests on the calculation of a break-even age — the age at which the amount you receive if you claim later equals the amount you would have received if you had claimed earlier. “What is deeply fallacious about this approach is that it induces people to think about the chance of dying too soon, rather than focusing them on what Social Security is best at – namely, protecting us against living too long. When [financial] advisors use this approach, it induces people to take their benefits early, which leaves them with lower benefits for the rest of their lives,” Mitchell says.

With Molly Povich

Jean Chatzky

Jean Chatzky