Social Security is a large share of retirement income for many Americans. However, both people who are still working and retirees have a few common misconceptions about Social Security and how it can fit into their financial plan. In this blog, we debunk several common Social Security myths.
5 Social Security Myths to Avoid
1. Social Security Must be Claimed at Age 62
Although people may begin claiming Social Security benefits at age 62, they don’t necessarily have to.
In many cases, claiming Social Security at age 62 will permanently reduce the amount of money someone receives. Delaying Social Security may result in larger benefits.
2. It’s Always Smart to Delay Benefits
Similarly, it’s not always the best decision to delay Social Security benefits. Depending on an individual’s financial and life situation, it may be recommended to claim Social Security earlier.
We recommend conducting a break-even analysis with a Certified Financial Planner® professional to determine the best course of action.
3. Social Security Alone Can Serve as My Entire Retirement Income
Although Social Security can account for a large amount of retirement income (when planned right), it’s not recommended to rely on it as your sole source of income.
Supplementing Social Security with distributions from a 401(k), IRA and other investment options can help you to live a more enjoyable life during retirement by traveling, spending time with family and more.
4. Social Security Benefits Are Always Tax-Free
Some people will have to pay federal income taxes on their Social Security benefits. This typically happens to retirees who have other substantial income that must be reported on their tax returns.
For more information, visit the Social Security Administration’s website.
5. Social Security is Going to Run Out
One of the most common Social Security myths is that it’s going to run out any day now. While claims that Social Security is facing financial troubles are true, it is not on the brink of collapse or bankruptcy.
Benefits could be reduced in the next few decades, but as long as taxes are being paid into it, Social Security is not likely to run out any time soon.
Social Security can be a great source of income during your retirement, but it’s important to understand how it fits in with the rest of your financial plan. Contact a Certified Financial Planner® professional today to learn more.