Many people question whether Social Security will be there for them in the future. They hear claims that spark doubt about having enough money later. The truth? Social Security has a trust fund, and while the system faces challenges, it isn't empty yet.

In this post, we'll debunk common myths about Social Security, explain how it works, and help you understand when and how to collect benefits—so you can plan with confidence.

Myth #1: Social Security is going broke

The notion that Social Security is running out of money isn't true. The Social Security program is funded by payroll taxes paid by workers and employers.

It also has a trust fund set up for extra support.

Now, it's expected that the trust fund might be used up around 2035. But even then, Social Security won't be "broke." Payroll taxes will still come in. These taxes can cover about 83% of scheduled benefits after the trust fund is depleted.

So, while there may be less money available, the system will still work and pay out benefits, just not at full capacity without some changes.

Myth #2: The Social Security retirement age is 65

The belief that the retirement age remains at 65 is outdated. The full retirement age has gone up because of updates to the law. Now, it depends on when you were born.

If you were born after 1960, your full retirement age is 67. For those born between 1943 and 1954, the age is 66.

The Social Security Administration adjusts the retirement age based on year of birth.

This means you can start taking Social Security benefits at different ages, from as early as age 62, but doing so may reduce your monthly benefit amount if taken before reaching your full retirement age.

Myth #3: You don't pay taxes on Social Security benefits

The idea that Social Security benefits are tax-free is incorrect. Depending on your total income, you might have to pay federal taxes on those benefits. If your income is above a certain level, up to 85% of your Social Security payments could be taxed.

The Internal Revenue Service (IRS) sets these rules. Each year, they update the income limits for taxation. It's important to check how this affects your retirement plan and Social Security income.

Knowing the facts about Social Security taxes can help you prepare for tax season better.

Myth #4: Members of Congress don't pay into Social Security

Contrary to popular belief, members of Congress do pay into Social Security like the rest of us. They contribute to the same system that provides benefits to working Americans.

Since 1984, all federal employees, including Congress members, have paid into Social Security. Their contributions help finance retirement income and other benefits for many people.

No one is exempt from these Social Security taxes—Congress included!

Myth #5: An ex-spouse's benefits come out of your own

An ex-spouse's Social Security benefits do not come out of your own. This is a common misconception. If you were married for at least 10 years, you may qualify for spousal benefits based on their work record.

You can claim up to 50% of their benefit amount, even if they have not claimed yet.

Your own benefits will stay the same. Claiming an ex-spouse's benefits does not reduce what you receive. Both parties can collect their full amounts without affecting each other's payments.

This means that your retirement security is safe, regardless of your ex-spouse's situation.

Myth #6: You lose benefits permanently if you keep working

The assumption that working means permanently losing Social Security benefits is false. You can still collect Social Security benefits while working, but your earnings matter. If you earn above a certain limit, your benefits may be reduced for that year.

For example, in 2023, if you make more than $21,240 a year before reaching full retirement age, the Social Security Administration will cut $1 from your benefit for every $2 earned over that amount.

However, once you reach full retirement age—between 66 and 67—you can work without any reduction in your monthly benefits.

Work With a Financial Advisor to Make the Most of Social Security

Social Security plays a vital role in retirement planning, but misconceptions can lead to costly mistakes. A Farther financial advisor can help you separate fact from fiction, optimize your claiming strategy, and coordinate Social Security with your other retirement income sources.

With expert guidance, you can maximize your benefits, minimize taxes, and ensure long-term financial security. Make informed decisions about your Social Security—talk to an advisor today.

Conclusion

Understanding Social Security is essential for making confident financial decisions about your future. With so much misinformation circulating, knowing what's true and what's not can make a significant difference in your retirement planning. We've debunked six common myths—from the program's solvency to taxation rules and work restrictions.

By knowing the facts, you can make smarter choices about when to claim benefits and how to incorporate Social Security into your overall financial strategy. The system may be complex, but with accurate information, you can navigate it successfully and secure your financial future.

For more in-depth information, visit the official Social Security website. Your financial future is in your hands—take charge today!

FAQs

1. What are some common myths about Social Security?

There are many misconceptions that cloud the understanding of how the Social Security program is financed, including beliefs about the general fund's involvement, taxation of benefits, and age requirements for receiving benefits.

2. Is there a specific age to start claiming Social Security benefits?

While many believe you must be 65 to begin collecting Social Security, you can actually claim your monthly Social Security benefits as early as age 62.

3. Are all employees covered by Social Security payroll taxes?

Yes, most working years contribute to your Social Security payroll taxes paid which qualify you for future benefits. However, tax advice should be sought for individual circumstances.

4. How does the government use the Social Security funds I've paid into?

Contrary to popular belief, Social Security funds are not directly placed in the federal government's general fund for other spending. Instead, the money you contribute goes into the Social Security Trust Fund, which is used exclusively to pay benefits and administrative costs. However, the trust fund does invest in special U.S. Treasury securities, meaning the government borrows from it and pays interest back over time.

5. Can I rely on Social Security during my retirement years?

The reality may differ from common myth: while it's true that factors like longer life expectancies could reduce benefits over time, currently no law is making changes that would stop payments entirely.

6. Where can I find accurate information about Social Security?

For up-to-date and authentic information regarding any question of accounting practices--it's best to visit official resources such as the "Social Security" section on a reliable government website.

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