Social Security is a significant source of retirement and disability income for Americans, and is therefore a major lifeline for the senior population as well as those with some serious disability. However, many Americans are confused about certain aspects of social security benefits. Many others are concerned about what they think is large-scale fraudulent activities to secure benefits. Instances of fraud may be there, but on the whole the program ensures benefits to really deserving claimants. For instance, disability benefits are granted only after a stringent medical record analysis to gather evidence regarding the disability, its nature and severity. There are many myths surrounding social security and its various aspects. Let us examine some of these myths and the actual facts.
- Social Security retirement benefits are paid based on your last 10 years of work (or 5, or 15): This is not true. Social security retirement payments are based on a worker’s lifetime earnings. The SSA calculates pensions using a formula based on the average of a worker’s 35 highest years of earnings, indexed for inflation. The number of years is fewer in cases involving disability or mid-career death. Each additional year of work the worker puts in could substitute current earnings for an earlier year of low earnings.
- It is best to start receiving benefits as early as possible: The earliest age at which you can collect social security benefits is 62, and some experts advise people to do so. Proponents of this view say that if you don’t need the money to cover your living expenses, it is best to invest it profitably. Then, you may have more money as time goes by than if you had waited until full retirement age (between age 66 and 67), depending on when you were born. Another view is that you should collect retirement benefits as soon as you can because you may not be able to get the benefits at the current level for much longer. This view is held by those who are concerned that the government may cut down the benefit amount to keep the program afloat.
However, taking social security benefits before full retirement age may not be a good decision. This is because your monthly benefits will be reduced for the rest of your life. If you start collecting benefits at the age of 62, you will receive just 75% as much money each month as you would have received if you had waited until the age of 66, your full retirement age. If you can wait longer, maybe up to age 70 when your benefits will be maximum, you will receive even more each month. Another thing to note is that over-concern regarding the program’s existence is misplaced because it may be extremely difficult to reduce the benefits of workers who have already earned them. To ensure accurate calculations and reimbursement of due benefits, the SSA has made significant investment in technology and counseling resources and Americans place their trust on them for retirement planning security.
- There will be no impact on your spouse’s benefit even if you work for a longer period of time: This is wrong because by continuing to work and increasing the earnings base for calculating your own social security benefits, you also increase your spouse’s monthly check if he/she is eligible for a spousal benefit rather than a benefit solely based on his/her own work history.
- If your spouse is not working, he/she does not get a retirement benefit: This again is a myth. If you are married and have never worked, you may be eligible for a pension amount equal to half of your spouse’s full retirement age benefit if you claim at your full retirement age. If the claim is made earlier, the benefits will be reduced.
- The COLA is set by the President: This is a myth because the annual COLA adjustment is not determined by the president or by congressional lawmakers. It is the SSA that sets the COLA. For this they compare the CPI-W (Consumer Price Index for Urban and Clerical Workers) for the third quarter of the present year against the inflation rate for the corresponding quarter of year in which a COLA was last approved.
- Members of the Congress don’t pay into the system: In the year 1984, the President, members of the Congress and government employees became part of the social security system and have been paying into it.
- Social security benefits are paid to undocumented immigrants: They are not allowed to claim social security.
- Social security benefits are tax-free: Social security benefits could be taxable if your income exceeds a certain amount. In 2019, for instance, couples with a combined income between $32,000 and $44,000 who file a joint tax return will have to pay tax on up to 50% of their benefits. If their combined income is more than $44,000, they will have to pay tax on up to 85% of their benefits. The combined income of the couple means their adjusted gross income plus any non-taxable interest they may have received, plus one-half of their social security benefits.
As providers of medical record retrieval services for social security lawyers, we know how important it is to understand the true facts regarding social security benefits. Only with good awareness regarding it can you enjoy the benefits offered by this welfare program.