Today, Social Security is a crucial source of retirement income for millions of seniors. It serves as their sole source for many.
You wouldn’t want to land in that boat in a perfect world. You can face years of financial hardship if you retire on Social Security alone. Planning to retire with various income streams at your disposal, such as money in a savings plan, multiple investments, and even part-time employment, if that makes sense for you, is a much better bet.
In any case, there’s a considerable possibility that Social Security will be a significant part of your retirement income. Therefore, it’s crucial to file for benefits deliberately. But if you believe these four falsehoods, you can find yourself claiming benefits when you shouldn’t and shorting yourself.
1. Social Security will be abolished shortly.
Social Security is experiencing a funding gap. It anticipates owing more in benefits than it receives in the upcoming years, partly due to the projected mass retirement of baby boomers.
Now that trust funds are available, Social Security can use them to fill the deficit. However, benefit reductions could be considered after the trust assets run out, which could happen in less than ten years.
Benefit reductions, however, are very different from Social Security ceasing to exist. It’s crucial to recognize this distinction.
It’s common knowledge that it’s wise to apply for benefits as soon as possible to receive payments before Social Security runs out of money entirely. But if you take your benefits early, all you’ll accomplish is eliminate a significant source of retirement income for the rest of your life, leaving you with even less cash in the face of benefit reductions.
2. You should apply for Social Security at age 65.
Medicare eligibility starts at age 65. As a result, you’ll frequently hear that you must enroll in Social Security concurrently. However, you are under no obligation to do that.
Even though Medicare eligibility may begin at age 65, depending on your birth year, you may not be eligible for your full monthly Social Security income until you are 66, 67, or 66 and a specific number of months old. Therefore, if you begin collecting Social Security at age 65, you will always get a reduced payment.
Your Social Security payments will be used to cover your monthly Medicare Part B premiums if enrolled in both Social Security and Medicare simultaneously. It’s also okay if you’re not receiving benefits. Medicare will find a way to get your money if you apply for it and start getting health insurance without Social Security.
3. You can get Social Security payments tax-free.
There’s a significant possibility you won’t have to pay taxes on your benefits if Social Security is your primary source of retirement income. If not, taxes may apply, depending on the total amount of your retirement income.
That includes federal taxes. Some states also tax the income received from Social Security.
Knowing in advance that your retirement benefits can be taxed will be crucial since it may affect how you file. For instance, you can enroll later in a larger benefit to compensate for the money you lost to taxes.
4. Your marital status matters.
Your marital status must be a significant consideration in deciding when to start receiving benefits.
If you’re married and begin receiving benefits sooner, your spouse may not be eligible for spousal or survivor benefits.
According to Jones, delaying benefits claims until age 70 might result in a boost in payments for surviving spouses. He says “one partner is “far more likely to survive for a significant period without the other.”
If you are of full retirement age and were born before January 2, 1954, you can take a spousal benefit while letting your benefits accrue. You can afterward turn it off for your own higher advantage.
However, due to modifications Congress made to the Social Security laws, anyone born after that date can no longer adopt that technique.
Clarify your facts.
There is a ton of false information about Social Security out there. Spend some time reading up on the program so you can get your facts straight if you want to avoid making what may wind up being a significant filing error.
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