3 Misconceptions About Social Security You Can’t Afford To Mistake | | Personal finance
3 Misconceptions About Social Security You Can’t Afford To Mistake | |  Personal finance

3 Misconceptions About Social Security You Can’t Afford To Mistake | | Personal finance

(Maurie Backman)

Social security has been around for a long time and certain aspects of the program may change from year to year. But Social Security has a number of basic rules that are important to know. And if you buy into these misconceptions, you can get less money during retirement.

1. Benefits are only temporarily reduced if you apply early

You are entitled to your full monthly Social Security benefit based on your earnings history when you reach full retirement age, or OFF. If you were born in 1960 or later, FRA is 67.

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Now you are only allowed to sign up for Social Security at age 62. But for every month you claim benefits prior to OFF, they are reduced.

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Some people are led to believe that if they apply for social security early and cut back on their monthly benefit as soon as the FRA takes effect, that benefit will be restored to its full amount. But that is not true.

If you sign up to receive benefits early, the penalty is one lifelong reduction of benefits. Make sure you understand it – and can afford it.

2. The longer you defer your benefits, the more money you get

It is true delaying services previous FRA will result in a higher monthly salary for life – but only to a point. You cannot defer your social security application indefinitely, and once you turn 70, you will not be able to earn the late retirement credits that result in higher benefits.

In fact, if you end up applying for Social Security after 70 years, you could lose money in the process. So while waiting until you turn 70 to sign up can end up being a smart financial decision, then it really is your end point for claiming benefits.

3. You can not receive unemployment benefits if you have never worked

Social benefits are based on lifetime earnings. If you have never worked and do not have an earnings history, you can assume that the benefits are out of the table for you and give up reporting. But it can end up being a mistake.

If you are or were married to a person who is eligible for social security based on their earnings history, you may be eligible for spousal benefits. These benefits will equal up to 50% of what your spouse or ex-spouse charges each month.

Now the one catch is that if you are still married, you can not claim a spouse benefit until your spouse applies for social security. But otherwise you can be entitled to a nice sum of money every month – even if you have never paid for social security yourself.

Know the rules

Social security is a complex program with lots of rules. And let’s face it – studying these rules does not exactly have the potential for an exciting evening.

But it is important to read up on social security, even though retirement is many years away. And it is especially important to educate yourself on how the program works if you are preparing to benefit. Doing so can help you avoid falling victim to misunderstandings like these, which can rob you of money you are otherwise entitled to.

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