Misconceptions Cost You Money
Economizer Original Edition #111425
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74% of Americans think they’re reasonably informed about Social Security, yet so many misapply information or just plain get it wrong. There’s a lot of misinformation floating around, according to a recent AAPR survey. Every soon-to-be retiree must discern truths and misinformation to be prepared for retirement.
Some of the most common misconceptions and their corrections.
What is your full retirement age?
Full Retirement Age or FRA is when you can collect Social Security without seeing a reduction in benefits.
However, you can claim Social Security as early as age 62, but doing so results in a permanent reduction in your monthly benefit amount.
Is age 65 the full retirement age?
38% of respondents said yes, 37% said no and 24% didn’t know.
Age 65 is when Medicare eligibility generally begins, but FRA for Social Security is 67 for anyone born in 1960 or later.
Does SS provide spousal benefits for divorcees?
· Divorced spouses can also receive retirement benefits, even if they don’t have an earnings record of their own.
Are spousal benefits based on a former spouse’s work history if they were married for 10 years or more. (Has to be 10 years not 9 yrs and 364 days),
44% said yes, 9% said no and 46% said they didn’t know.
The correct answer is yes
Divorcees can begin collecting spousal benefits at 62, but filing before full retirement age will reduce the monthly amount. To qualify, they must also have been divorced for at least two years and must not be remarried.
Most don’t know how the program’s earnings-test limits work
40% of respondents said they didn’t know what happens when someone works while collecting Social Security.
Another 30% believed that benefits are reduced and never paid back.
Only 29% knew the rules.
Once you reach full retirement age, you can earn as much as you like without affecting your benefits.
Before that, the earnings test applies, and earning above a certain limit means some of your benefits are withheld. In 2025, limits are adjusted annually, $1 in benefits is withheld per $2 in earned above $23,400.
For those reaching full retirement age this year, the threshold is higher: $1 withheld for every $3 earned above $62,160.
The good news: any withheld benefits are not lost. Once you hit full retirement age, your monthly payment should increase to account for what was withheld.
Many don’t know what happens if trust funds run out.
There is much information that Social Security is running out of money. The truth is that only the trust funds are being used up.
34% of respondents said benefits wouldn’t be reduced
64% believed Social Security would stop paying benefits altogether.
Another 47% thought benefits would be cut by at least half.
According to the latest Social Security Trustees report, the Old-Age and Survivors Insurance (OASI) trust fund is expected to be depleted by 2033. At that point, only 77% of scheduled benefits would be payable. Social Security Is Not Collecting Enough Taxes to Reach 2034. Payments will not stop altogether.
Steps to do today:
Get yourself a plan B right away.