When it comes to Social Security – and understanding your financial future – it’s important to sort fact from fiction. MSN Money recently posted a great story debunking the top five Social Security myths.
It’s important to first understand what Social Security is and why we have it. It began in 1935 when President Franklin D. Roosevelt signed the Social Security Act. It came about as a result of The Great Depression, when about 15 million Americans were unemployed. Today, the Social Security Administration website calls it “an ‘anti-poverty program,” which provides “retirement, disability and survivor’s benefits.'”
Now that you have a basic understanding of why we have this program and who it benefits, let’s look into some of the common misconceptions about Social Security that MSN Money lists:
- “You have to start claiming Social Security at age 62.” While you are eligible to start collecting Social Security at age 62, you can delay when you start receiving benefits. In fact, if you delay retirement past age 62, your annual benefit amount might even increase.
- “You will never get the money back you put into the program.” This myth stems from a misunderstanding of how the system works or could work in the future. The MSN article points out that the Supreme Court ruled in Helvering v. Davis that Social Security was constitutional but: “The proceeds… are to be paid into the Treasury like internal-revenue taxes generally and are not earmarked in any way.”
- “Social Security is going away.” This is the most common myth and a cause of concern for the majority of American workers. Projections show that Social Security asset reserves may become depleted and will be unable to pay scheduled benefits in full on a timely basis in 2035. The program will not disappear because working people continue to pay Social Security taxes. However, benefit payments may need to be reduced to offset the depleted cash reserves – a serious issue.
- “If you’re self-employed, you won’t qualify for Social Security.” Typically, employers and employees share the 12.4% tax on wages designated for Social Security, with each paying 6.2%. Freelancers and the self-employed should pay the full 12.4% themselves. If they are paying those taxes, then they are paying into Social Security and should be able to receive benefits upon retirement.
- “You can’t collect Social Security if you retire and live abroad.” You may be eligible to collect your benefits depending upon where you live. People living in Cuba or North Korea cannot receive benefits because of U.S. Department of Treasury sanctions. Before making a life changing decision to relocate, be sure to check with the Social Security Administration to find out if you can receive your benefit funds in your new chosen homeland.
The Seniors Trust is working to protect the future of our Social Security system. Please consider joining our mission to increase benefits for seniors through passage of the Social Security Expansion Act. Show your support and stay up-to-date by following The Seniors Trust on Facebook and Twitter.