Social Security is like the weather, in that we love to talk about it, but we don’t know how to deal with it until it affects us. When it rains you use an umbrella and when you retire you use Social Security, easy. A lot of people like to think they know everything about the weather. It’s the same for Social Security.
People assume Social Security is simple; often buying into Social Security myths that promise an easy retirement. In truth, Social Security is more complex than we give it credit for, and simple myths can actually do more harm than good. Here are three Social Security myths in need of debunking.
Myth # 1 Social Security is the Same as Saving for Retirement
It’s not. Saving for retirement and claiming Social Security benefits are not the same thing. Social Security only replaces about 40% of your income, based off your earnings over a 35-year period. How much you earn affects how much you’ll receive in benefits, not how much you store away in a savings account. So, no matter how much tax you pay, your Social Security benefits will only ever depend on your income. It is absolutely necessary to have one, if not a few, retirement savings accounts in addition to claiming Social Security benefits.
Myth #2 I can Fully Retire at 65
This Social Security myth was once the case but is no longer true. For those born after 1960, the full retirement age is 67. This might seem like a small detail, but it is not. You can claim your Social Security benefits early at the age 62 but it considerably lowers your benefits. Taking your benefits early, while thinking you are fully retired when you aren’t, means leaving money on the table.
Myth #3 Social Security is Going Away
This is the scariest Social Security myth by far. The good news is that Social Security is not going to disappear. It does, however, face some budgetary crisis that need to be addressed. The trouble comes from a funding issue, were if the Social Security were to become insolvent, that would mean about a 30% reduction in benefits. That is still bad. The reasons for this are many, but one main reason is that the government borrows from the Social Security Trust and then is painfully slow in paying it back.
Myths and assumptions are dangerous because they can mislead us. Not fully understanding Social Security means that you can endanger your own retirement by not seizing your full benefit. Stay informed, and make sure to follow only the facts.