Social Security is one of the most popular, yet most misunderstood, benefit programs in US history. It has lifted millions of seniors out of poverty and serves as a major source of income for most retirees. But a large number of Americans harbor some major misconceptions about it that can end up costing them money.
In fact, nearly three quarters of all Americans believe in a dangerous Social Security myth that could lead them to make the wrong decisions about their future retirement benefits. And you don’t want to be one of them.
Don’t Believe This Common Misconception About Social Security
According to the TransAmerica Center for Retirement Studies, 73% of workers who responded to a recent survey said they agreed with the statement: “I’m concerned that when I’m ready to retire, Social Security won’t be there for me.”
It is understandable Why so many people think that benefits are about to run out. There are frequent warnings about the future of the Social Security trust fund. Recently, the program administrators even released a report indicating that the trust fund will be exhausted in 2034.
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But that’s actually a lot scarier than it sounds. Even if the trust fund dries up, that doesn’t mean there won’t be Social Security benefits for you. The trust fund is not the only source of funds from which benefits can be paid. Current employees and their employers pay Social Security taxes year round. The income from these taxes can be used to pay benefits to current retirees.
The income coming in is expected to be enough to pay for 78% of the promised benefits, even if the trust fund falls short. So in the worst-case scenario, where government officials fail to act to support one of the country’s most beloved benefit programs, retirees would receive nearly all of their promised benefits in the future, with only a 22% pay cut.
While this wouldn’t be pleasant, it’s far from the fact that Social Security won’t be there at all for current employees in the future.
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Why You Shouldn’t Accept This Misplaced Social Security Fear
That said, if you expect Social Security to fall short and it motivates you to save more money for retirement, that’s not a bad thing.
The problem arises, however, when scary Social Security headlines about the program running out of money prompt you to claim your pension benefits earlier than you would have done otherwise.
Claiming benefits early has financial consequences that can last throughout your retirement, such as: early filing penalties can reduce your check by up to 30% while you waive deferred pension credits means that you will miss out on a benefit increase of no less than 8% per year.
Rather than anticipating that Social Security won’t be there for you, make your decisions about claiming benefits on the assumption that you’ll likely get most or all of the money promised, as it’s unlikely you’ll get it. lawmakers to drastically reduce such a popular program.
But you also have to realize that even if you get every dollar promised, you… additional savings, so plan accordingly.
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