3 Social Security Misconceptions You Can’t Afford to Get Wrong | Smart Change: Personal Finance

(Maurie Backman)

Social Security has been around for a long time and certain aspects of the program can change from year to year. But Social Security has some basic rules that are important to know. And if you believe in these misconceptions, you may have less money left over in retirement.

1. Benefits are only temporarily reduced if you file a return earlier

You are entitled to your full monthly Social Security benefit based on your income history once you reach full retirement age or FRA. If you were born in 1960 or later, FRA is 67.

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Now you can register for social security for the first time at the age of 62. But for every month you claim benefits before FRA, they are reduced.

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Some people are led to believe that if they apply for Social Security early and cut their monthly benefit, once FRA kicks in, that benefit will be fully reinstated. But that is not true.

If you apply early to receive benefits, the penalty is a lifetime reduction of benefits. Make sure you understand that – and can afford it.

2. The longer you delay your benefits, the more money you get

It’s true that delaying benefits beyond FRA will result in a higher monthly payday for life – but only to a certain extent. You can’t indefinitely defer your Social Security application, and once you turn 70, you can’t accrue the deferred retirement credits that result in higher benefits.

If you delay applying for Social Security after age 70, you could even lose money in the process. So while waiting until age 70 to sign up might be a smart financial decision, that’s really your end point for claiming benefits.

3. You cannot receive benefits if you have never worked

Social Security benefits are based on lifetime income. If you’ve never worked and have no income history, you can assume the benefits are off the table for you and sign up to file a return. But that could ultimately be a mistake.

If you are or were married to someone who qualifies for Social Security based on their income history, you may be entitled to partner benefits. These benefits amount to a maximum of 50% of what your spouse or ex-spouse collects each month.

The only downside is that if you’re still married, you won’t be able to claim spousal support until your spouse has filed for Social Security. But otherwise, you may be entitled to a nice sum of money each month — even if you never paid to Social Security yourself.

know the rules

Social Security is a complex program with many rules. And let’s face it — studying those rules doesn’t exactly have the ingredients for an exciting evening.

But it’s important to read Social Security, even if retirement is many years away. And his mainly It’s important to educate yourself about how the program works as you prepare to claim benefits. Doing so can help you avoid falling victim to misconceptions like this that can take money away from you that you are otherwise entitled to.

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