Previously in Part I, we highlighted four of the most common myths & misconceptions about collecting Social Security. First, we debunked Myths #1 & #2 – “Social Security won’t be around when you need it,” and “Social Security is all you’ll need.” Next we looked at the misconceptions around Myths #3 & #4 – “File as early as possible,” and “File as late as possible.”
The last three Myths we hear less often, but can cause the most harm.
Myth No. 5: You’ll Lose Benefits if You Continue to Work after Filing a Claim
If you file before your full retirement age (FRA) and continue to work, your benefits may be temporarily reduced depending on how much you earn. Currently (2016), you can earn up to $15,720 before your benefits are reduced, and this also applies to your spouse, if you are married. Therefore, you can earn around $30,000 before your Social Security payments are affected. Once you reach those limits, you’ll lose $1 for every $2 you earn over that threshold. In the year you reach FRA, you can earn $41,880 and only lose $1 for every $3 earned over that limit. In the years following FRA, there is no income limit. You can earn as much as you are able and still collect your full Social Security benefit. Control your wages and you’ll control your benefits.
Myth No. 6: You’re Out of Luck if You’ve Never Worked Outside the Home
It’s true that regular benefits are based on an employment record of at least 40 quarters. But those who haven’t worked for that long, or at all, can receive half of what a spouse or even an ex-spouse would receive (as long as you were married for at least 10 years and haven’t remarried). If you’re a surviving spouse, you may be eligible for full benefits on your spouse’s record. Even ex-spouses can claim full survivor benefits as long as you were married for more than 10 years and never remarried before he or she passed away. Of note: remarriage after age 60 does not prevent or stop entitlement to benefits for survivors – even for ex-spouse survivors.
Myth No. 7: Follow Advice from Friends and Family
This one seems obvious, but surprisingly, we see it frequently. If you are in your 60’s, so are many of your friends. Their choices regarding Social Security may not be the best choices for you. Filing for Social Security based entirely on advice from nonprofessionals may work just fine, but it may not help you maximize benefits, which could leave thousands of dollars “on the table.” Often a consultation with a qualified financial planner can help determine the best strategy for you.
Clearly, knowing the best options for you and your family depend on knowing the technicalities of Social Security. However, we find that how well we know our clients often matters more.
In our Concierge Financial Planning process, we take the time to evaluate all the options, but dig deeper, discuss health and family history. We talk about what would happen should a spouse pass away and how income would want to be handled by the survivor.
Sometimes the best answer on paper is not the best answer in practice. Only you know what best for you, but knowing an advisor with the experience who’s helped many through these decisions may be the best place to start.
Sources: ssa.gov; investopedia.com; forbes. com