Social Security is a much-needed lifeline for many American seniors. Still, there is a lot of things people do not understand about Social Security Insurance. Here are three of the most common myths and misconceptions about Social Security.
1. The System is on the verge of bankruptcy
Social Security may have its financial woes, but the idea that the program will go bankrupt in “X” number of years is simply false. The ability of the program to keep up with its obligations in the coming years may be challenging, and there may be benefit cuts of as much as 24% to save the system.
Clearly, that’s not great news. But it’s a very different story than the program going bankrupt completely, and you can rest assured that the latter scenario is not on the table. Even if benefits are reduced in the future, the program should still be in a position to pay recipients a substantial amount of money each month.
2. Social Security will be the same as your current paycheck
This is an unfortunate mistake that many Americans think. Social Security was never intended to be a dollar-for-dollar replacement of your salary. The average senior on Social Security today collects $1,543 a month. If you’re an average earner and are retiring soon, you can expect a comparable payday. But chances are, $1,543 isn’t enough to live on — and it’s nowhere close to what you’re earning today. If you’re a typical wage-earner, you can expect your benefits to replace about 40% of your current income, assuming benefits don’t get cut.
3. There is nothing you can do to increase your benefit amount
This is also false. Earning your maximum benefit is all tied to the age at which you decide to retire. You can claim your full monthly benefit based on your wage history once you reach full retirement age or FRA. FRA is 67 for anyone born in 1960 or later. That said, you can sign up for Social Security as early as age 62, but filing ahead of FRA will shrink your monthly benefit for life. On the other hand, if you delay your benefits past FRA, they’ll grow by 8% a year, up until you turn 70. Go that route, and you’ll score a much higher monthly payout.
Believing in the above Social Security myths can cause you to make improper retirement decisions. Now that you know the truth, you can better plan ahead for a financially secure retirement!