Social Security is something that millions of seniors depend on due to the benefits that help them cover some of their bills during retirement. However, like most aspects of our society, there is a lot of misinformation circulating regarding Social Security. It is important to recognize what is fact from what is fiction in order to make the most out of the benefits offered. So, here are some of the common myths about Social Security you should not believe.
It is true that social security is currently facing a shortage where, if left alone, could see benefits get slashed by as much as 23% by 2034. However, there is a huge difference between that possible worst-case scenario and the idea of the program completely running out of money. Buying into that line of thinking could spell trouble as you might act hastily in regards to your benefits. The truth is, Social Security could never really run out of money due to the fact it is funded through payroll taxes. So, as long as we have a workforce that continues to collect taxes, there will still be money in Social Security.
Social Security is designed to pay you the same amount of lifetime benefits regardless of if you filed at the earliest age possible which is 62 or the latest age possible of 70. The logic behind this is that any reduction you might receive in your monthly payments by filing early is offset from the larger number of individual payments you collect. This makes sense as when you hold off on benefits, it may boost your payments, however, you will collect fewer in the process. Now, this formula is meant to assume that you live the average life expectancy. So, if you have any reason to believe you may not live very long, whether it be through illness, etc. your best bet is to file as early as possible. On the other hand, if you have great health and a solid family history of long life, then you can afford to wait as long as possible to file so that you can maximize the amount of money you receive.
Beginning in 1975, recipients of Social Security were receiving automatic cost-of-living adjustments (COLAs) which helped keep their benefits at pace with inflation. So, one would assume that they are in a good place with the thought that the amount you begin collecting will gradually go up over time. However, the problem is that in recent years COLAs have failed to match the rate of inflation which has put many seniors at an automatic disadvantage. Additionally, COLAs get overtaken by Medicare premiums due to Social Security’s “hold harmless” provision, meaning seniors often see little to no extra money in their pockets once the COLAs are put in place.