Many Americans have come to believe certain myths about Social Security benefits and may be misinformed on a range of important topics, such as who is actually eligible to receive benefits, how much they will receive when they apply for benefits, or whether Social Security will pay for their long-term care, to name a few. While the future of Social Security may be uncertain, it is essential to understand the facts about Social Security, particularly what your benefits are, and what they are not, so you can make informed decisions to help prepare for your future.
Let’s explore the five biggest myths circulating today about Social Security to set the record straight.
1) Everyone who has worked is entitled to receive Social Security benefits. Unfortunately, this is a misconception that may come as a big surprise to many U.S. workers when planning to retire. The government pension offset (GPO) is a Federal law that reduces the spousal and survivor ’s benefits for most retirees who collect pensions from jobs that are not covered by Social Security. The following are affected by the GPO: state and/or local government agency employees not covered by Social Security; Federal employees who were hired before January 1, 1984; and teachers who work in state retirement system districts not covered by Social Security. In addition, individuals who are convicted of a criminal offense are not eligible to receive benefits while imprisoned.
2) Social Security benefits will fund my retirement. Back in the mid-1930s, Social Security was originally designed to help the most vulnerable population hit hard during the Great Depression—older Americans who had no savings after a lifetime of work. Social Security benefits alone, however, were never intended to serve as the major component of a retirement plan. Benefits provide only a base level of income and are meant to supplement retirement funds from other sources, such as employer-sponsored defined benefit plans (e.g., company pensions) and/or defined contribution plans (e.g., 401(k)s), and personal savings.
3) Only people who have worked are eligible for Social Security benefits. Here is an abreviated list of individuals who may not have worked under Social Security but are eligible to receive benefits:
- A spouse may be eligible for benefits despite never having worked, if he or she is at least age 62, and the husband or wife is a recipient of, or is eligible for, retirement or disability benefits.
- An unmarried child may be eligible to receive benefits under the following circumstances: if under age 18, or 18–19 years old if a full-time student (no higher than grade 12); and if a parent(s) who is disabled or retired is entitled to Social Security benefits, or after the death of a parent who has worked long enough under Social Security. A child may also be eligible if age 18 and older and disabled, with the onset of disability before the age of 22.
- A widow(er) of a person who worked long enough under Social Security can receive full benefits at full retirement age for survivors, or reduced benefits at age 60 or age 50, if disabled.
4) Benefit amount is not affected by age. This is one of the biggest misconceptions about Social Security benefits. Because the age at which you apply for your benefits matters, here are some key points to consider:•
- The Social Security “give-back.” If you apply for benefits at age 62 (the earliest age at which you can apply) or older, but are still under the full retirement age (65–67 depending on your birth year), not only will you receive reduced Social Security benefits, but if you are still working, you must “give back” money. If you’re younger than full retirement age during all of 2018, you must give back $1 for every $2 earned above $17,040. If you reach full retirement age during 2018, your benefits are reduced by $1 for each $3 earned over $45,360 until the month you reach full retirement age.
- Benefits at full retirement age. When you reach your full retirement age, there is no limit on your earnings, and Social Security benefits are not reduced. Keep in mind that each year you delay applying beyond your full retirement age up to age 70, your monthly benefit amount increases by 8%.
- Maximum benefits. It is important to note that the maximum benefit for a person who retires at full retirement age is $2,788 per month (in 2018). The benefit for a non-working spouse would be only 50% of that amount.
5) Social Security pays for long-term care.
The reality is that you’re on your own when it comes to funding your long-term care, if
needed. Medicare, the government health insurance program for people age 65 and
over, and for those under 65 with certain disabilities and chronic conditions, only
covers short-term care. It may also cover some nursing home or assisted living costs,
but only for “skilled care” that is deemed medically necessary for the duration of an
illness, usually limited to 100 days following a three-day hospital stay.
When thinking about retirement, you may want to consider that Social Security benefits provide only a basic level of income. The age at which you choose to retire is a major factor in that equation, and there are other questions to ask yourself before making that important decision to retire, including: Will you have enough income to live on? What is the break- even point for benefits? Will you continue to work? Do you feel uncertain about the future of Social Security? Are you prepared to fund your long-term care in the future if you need it?
For further information about Social Security, and to estimate your future benefits online, go to ssa.gov.