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The 3 Biggest Social Security Myths

I recently had the pleasure of talking with one of the country's top retirement experts, and I came away with several ideas to maximize my Social Security benefits -- oh, and probably yours as well.

Three misconceptions
Jean Setzfand is the vice president of financial security at AARP in Washington, D.C. During our chat, I asked her about some of the biggest misconceptions people have about Social Security. She told me they center on some frequently asked questions:

  • I'm divorced. Is it possible my ex-spouse could delay or lower my benefits?
  • If I work too much, will I lose Social Security benefits?
  • Is delaying my benefits always the best way to increase my Social Security income?

Here's what Setzfand had to say about these Social Security myths:

Let's recap what she said.

Divorced spouses
If you have been married, or were previously married, for at least 10 years, your spouse or ex-spouse may have access to spousal or ex-spousal Social Security benefits through you. However, our ex cannot take away your benefits or reduce your benefits by tapping into his or hers early.

Here are some other things to consider, taken straight from the official Social Security website:

  • If you remarry, you generally cannot collect benefits on your former spouse's record unless your later marriage ends (whether by death, divorce, or annulment).
  • If your ex-spouse has not applied for retirement benefits but can qualify for them, you can receive benefits on his or her record if you have been divorced for at least two years.

Working after you begin to collect Social Security benefits
You cannot lose benefits by working too much after you've started collecting your Social Security income. If you earn more than a certain amount, you may be reducing your potential benefits before your full retirement age (which is between 65 and 67, depending on your date of birth), but you'll actually be "banking" those benefits and getting them back at full retirement. After your full retirement age, you can't reduce your take-home no matter how much money you make.

It's not always better to delay taking benefits
While AARP's normal advice is to delay taking your benefits as long as possible in order to maximize your monthly take-home, there are cases for dual-earning spouses when it's better to tap in earlier. If the higher-earning spouse waits for full retirement age, that person can unlock a spousal benefit for the lower-earning spouse to tap into sooner rather than later. This can give the lower-earning spouse the ability to wait and accrue maximum benefits by waiting until age 70 to tap into his or her own account.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.


Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On August 30, 2014, at 11:01 PM, greyhound44 wrote:

    If one is single and not working, it is insane to delay taking (MAX SS Retirement Benefits in my case) reduced for age at 62 - $150,059.70 tax free thus far.

    I get another $1760.90 tax free on 9 Sept while on an Alaskan Cruise.

    retired expatriate (11 years in Conde Nast's 2013 "World's Best City")

  • Report this Comment On August 31, 2014, at 11:28 AM, dusty10x wrote:

    .............Actually any work over 35 years ( Because they only count 35 years) is a free gift to social security and you "lose" any benefit to yourself from paying in those years....So YES you lose money or any benefit from paying in by working more than 35 years....Since they count the highest 35 years you might think the later years are worth more; but NOoooo....The formula they use has a higher multiplier to make old wage years that were 3 times or more less than current wages equal the same as present day wages.....So even if you make more money ( after the first 35 years are in ) any added benefit would have to be seen though a magnifying glass...........

  • Report this Comment On August 31, 2014, at 11:31 AM, gadfly1000 wrote:

    Well, Greyhound, it is not insane at all to wait. The total amount collected is not important. What's important is whether or not a person can live properly on the reduced amount, forever.

    If your full retirement would have been about $2460 ($1760 + Medicare $105) times 1.32, the added value for waiting, you must have been earning a good income and put part of it (a significant part?) away for retirement.

    Now unless your total income (half of Social Security plus all unearned income, from investments, etc.) is under $25,000, you owe taxes.

  • Report this Comment On August 31, 2014, at 11:43 AM, gadfly1000 wrote:

    No, dusty10x, you don't lose money.

    If you don't work those "extra" years, it's true you don't put in 6.2% of those non-earnings, but you also don't get the other 93.8% of those wages. :)

    The 35 year rule is actually an advantage, not a disadvantage. Pensions are calculated based upon average lifetime earnings, but Social Security allows you to toss out your lower earnings years before calculating the average, thus INCREASING that average, and it indexes for inflation to boot, so your pension is calculated to give you the money to live in today's dollars instead of dollars depleted by inflation for decades since you contributed them to the system!

    Quit complaining.

  • Report this Comment On August 31, 2014, at 11:50 AM, gadfly1000 wrote:

    Rex Moore says he was told: "If the higher-earning spouse waits for full retirement age, that person can unlock a spousal benefit for the lower-earning spouse to tap into sooner rather than later. This can give the lower-earning spouse the ability to wait and accrue maximum benefits by waiting until age 70"

    Well, Rex Moore heard wrong because that is usually NOT TRUE.

    The lower-earning spouse can NOT tap into spouse benefits without being forced to start his/her own benefits unless that lower-earning spouse is at full retirement age (currently 66).

  • Report this Comment On August 31, 2014, at 2:26 PM, gadfly1000 wrote:

    Rex Moore wrote: "you'll actually be "banking" those benefits and getting them back at full retirement."

    Well, that's not true either. It is true that your benefits will be recalculated when you reach full retirement age, but Social Security is not going to send you a check to replace the reduced benefits.

  • Report this Comment On September 02, 2014, at 5:31 PM, SkepikI wrote:

    Well Rex you have my sympathy for the inaccuracies in your article because you went to the "Greedy Geezers" (AARP) for answers... on second thought if you were crazy enough to take their word for it and not research it out for yourself, maybe you deserve the brickbats you get.

    The Greedy Geezers are out for their organization and staff and nobody else. They fleeced my inlaws and partents for years and actually did them dirt all the while pumping them for dues and "extra money" in contributions to "Save Social Security" and the like. Most of it went to their six and seven figure lobbyists....

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Rex Moore
TMFOrangeblood

Rex Moore spent his formative years in Texas, and fought beside Davy Crockett at the Alamo. He currently travels the globe for TMF, bringing back video reports on conferences and companies that matter for investors.

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