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Four Common Myths About Social Security

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When it comes to retirement planning, Social Security is a vital piece of the puzzle. However, there are still misconceptions about the way Social Security works, who is eligible and when you can apply for benefits.

Here are four Social Security myths you may have thought were true:

Myth #1: Your Social Security benefits are based on a specific period of your employment.

You may have heard that Social Security benefits are based on a specific period of time, such as your three highest-earning years of employment or your last 10 years of employment. However, according to the Social Security Administration (SSA), your benefits are computed using average lifetime earnings, up to a maximum of 35 years, indexed to bring past earnings up to an equivalent income in current dollars.

Myth #2: If you retire from the military, you cannot receive your military pension and collect Social Security benefits.

The good news for active duty service members is that you can collect both Social Security benefits based on your earnings and your military pension. Generally, the SSA will not reduce your Social Security benefits because of your retirement benefits for active duty service in the military. Since 1988, inactive duty service in the armed forces reserves (such as weekend drills) has also been covered by Social Security.

Myth #3: It’s always better to wait to start collecting your Social Security retirement benefits.

People born from 1943 to 1954 qualify for full Social Security benefits at age 66 (or what’s known as your full retirement age); those born from 1955 to 1959 qualify at two-month increments between ages 66 and 67; and if you were born in 1960 or later, your retirement age for full benefits is 67. Note that you can retire anytime between age 62 and your full retirement age, but your benefits will be reduced. On the other hand, if you plan on waiting until past your full retirement age to start collecting Social Security benefits, your payout could be higher.

However, no two people are alike, so you need to take into account your personal circumstances to determine the best course of action. Consider factors such as your life expectancy, marital status and children before deciding when to begin collecting benefits. For example, if your life expectancy is shortened due to an injury or illness, waiting until your full retirement age or later to collect a higher payout might actually yield a lower total benefit.

You can find more information to help you decide when to start receiving federal retirement benefits or create an account to see your Social Security statements at the Social Security Administration’s website.

Myth #4: It’s always better to start collecting your Social Security benefits as soon as possible.

The earliest you can start to receive Social Security benefits is age 62, but the sooner you begin collecting your benefits, the lower your monthly check will be. For example, if your full retirement age is 66, and you choose to start receiving benefits at age 62, your monthly benefit will be reduced by 25 percent to account for the longer period of time during which you will likely collect benefits. Note that this is a permanent reduction in your monthly benefit.

Just as waiting to collect benefits in order to maximize your monthly payment is not always the best course of action, collecting benefits as soon as you are eligible might hurt you in the long run, depending on your personal circumstances. If your life expectancy is average or above and you choose to file for benefits later, it could mean not only a higher monthly payment but also a higher total lifetime payment.

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