August 10, 2015
There is no doubt that Social Security can be challenging to understand. The Social Security disability professionals at Disability Associates, LLC. discuss five key points that most individuals misunderstand.
Many people, including those coming close to their retirement, struggle to grasp the basics of Social Security. According to a study conducted by MassMutual Life Insurance Company, only 28% of individuals passed a 10-question true or false quiz on Social Security benefits. Just one person out of more than 1,500 answered all 10 questions correctly.
This further proves that many individuals are confused about the Social Security system, process and/or benefits. Listed below are five of the most fundamental points many individuals get wrong.
- Staying in the workplace can reduce your benefits. Most individuals, roughly 55%, thought it was fine to keep working while receiving retirement benefits, regardless of age. However, people who have not reached their full retirement age could see Social Security benefits reduced if they earn above a certain amount.
For example, people born between 1943 and January 1, 1955 will have $1 deducted from their benefits for every $2 they earn above $15,720. This is only if they’re younger than their full retirement age. Keep in mind that this money does not just disappear – it will be added on after the individual reaches their full retirement age.
- Your official retirement age depends on your birth year. More than 70% of people surveyed thought the full retirement age was 65. This was the truth in the past, but now, an individual’s full retirement age varies depending on the year they were born. The full retirement age is 66 for people born between 1943 and 1954 and it gradually increases to 67 for people born in 1960 or later.
Those who collect benefits early get reduced monthly checks and those who wait beyond their retirement age can receive 8% more for every year they delay.
- You are able to collect spousal benefits post-divorce. Only 45% of people knew that individuals can collect Social Security spousal benefits even after a divorce. For example, two people have been married for 10 years and they decide to part ways. If the individual looking to collect their former spouse’s benefits has not remarried, they can still collect Social Security post-divorce.
That ex could even collect spousal benefits while they put off their own Social Security to take advantage of delayed retirement credits if they deem fit.
- You are able to collect even if you’re not a citizen. About 75% of the people surveyed wrongly stated that only citizens can collect Social Security. Workers are generally eligible to receive Social Security benefits after 10 years of working and paying taxes into the system. This is true regardless of whether you’re a citizen or not.
Workers who have legal residence status risk losing money if they overlook this rule and fail to collect the benefits they’ve rightfully earned.
- Social Security will likely be a significant part of your retirement plan. The majority of those surveyed said they expect Social Security to be around when they retire, while 44% said they will rely more on their own savings in retirement.
The truth is that 52% of married couples and 74% of single people receiving retirement benefits get more than half of their income from Social Security.
If individuals are even slightly confused about how the program works, it could substantially affect their retirement plan. It is important to know the specifics as it pertains to your unique situation and the Social Security process. To understand more about how Social Security works and how it will affect you and your family, contact the Social Security professionals at Disability Associates, LLC. in Maryland today.