Without question, there is plenty to misunderstand about Social Security’s 2,728 regulations and the countless rules and exceptions to them. Still, there is a lot of misinformation out there being accepted as truth. Understanding the quirks of the Social Security program is essential for a successful retirement.
Here are some of the big myths you probably believe, but shouldn’t.
MYTH 1: The retirement age is 65, and that’s when the amount of what you get will be the highest.
Nope. The traditional age of retirement used to be 65, but that needle has inched higher. Starting with people born in 1938 or later, the retirement age gradually increases until it reaches 67 for people born after 1959. The change was made in a 1983 provision to reflect the fact we are living longer and healthier.
To find out when you reach your full retirement age, you can use the agency’s calculator.
The earliest a person can start receiving reduced Social Security retirement benefits is at age 62. But once you do that, you will be locked into that lower benefit amount for life. For most people, a far better strategy is to wait as long as they can to begin collecting. Benefits grow by 8 percent a year until age 70 if you hold off receiving them.
MYTH 2: You can’t work once you’re on Social Security and if you do, there is a big penalty.
Yes, you can get Social Security retirement benefits and work at the same time. But if you are younger than full retirement age for the entire calendar year and exceed the yearly earnings limit, which for 2018 is $17,040 – Social Security will reduce your retirement benefit by $1 for every $2 you earn above that limit. Once you reach full retirement age, you can earn as much as you want and it won’t impact your benefits.
But things change in the year you reach your full retirement age. In that year, Social Security will deduct $1 in benefits for every $3 you earn above a different limit – $45,360 for 2018 – but only in the months before your birthday. Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
Use this retirement earnings test calculator to find out how much your benefits will be reduced. And remember that as long as you continue to work, you will continue to pay Social Security taxes on your earnings even if you are collecting benefits.
MYTH 3: If you leave the U.S. for more than 30 consecutive days, you will lose your Social Security benefits.
If this were true, it would certainly cast a pallor over those retiring abroad plans!
U.S. citizens can continue to receive payments outside the United States as long as they are eligible and are in a country where Social Security can send payments (so scratch North Korea or Cuba off your list of top retirement destinations). The rules vary for non-U.S. citizens, those collecting survivor or dependent benefits and those collecting off another person’s record.
You can use the payments abroad screening tool to help determine if you are eligible to continue collecting retirement benefits outside of the U.S. In most cases, if you reside in a country that restricts benefit payments, those benefits will be returned to you once you enter a country where payments can be sent.
Medicare, however, sees things differently. It covers only health care you get in the United States, with very few exceptions for those outside the country. Travelers relying on Medicare are urged to buy a Medigap or travel insurance policy with health care included.
Expats who retire overseas often pay out of pocket for their in-country health care. In many places, it’s cheaper. There are a few carriers who provide health insurance policies for expats, and once you’ve established residency in your adopted country, you may be eligible for its public health program.
MYTH 4: Divorced spouses are just plain out of luck.
Actually, Social Security takes pretty good care of ex-spouses. If the marriage lasted 10 years or more, your ex can receive spousal benefits off your record even if they have limited or non-existent work histories themselves. They just must be 62 or older and not have remarried.
A divorced spouse is entitled to a benefit that is equal to one-half of their ex-spouse’s full retirement amount (or disability benefit), and this in no way impacts the record-holder or his/her current spouse or takes money away from them.
Once an ex-spouse remarries, they generally cannot collect benefits off their former spouse’s record unless the later marriage ends, whether by death, divorce, or annulment.
MYTH 5: Stepchildren get nothing unless you legally adopt them.
If you become disabled or retire, your qualified child – whether biological, adopted or a dependent stepchild – is eligible for up to 50 percent of your full retirement age benefit. If you die, your qualified child is eligible for up to 75 percent of your full retirement age benefit.
Stepchildren, same as biological and adopted ones, are eligible for survivor’s benefits on your Social Security record if they are your dependents and unmarried at the time of your death. The stepparent relationship must have existed a year prior to application.
Social Security follows the IRS guidelines for dependents when it comes to stepkids: A dependent must have lived with you for at least half the year, and you must provide at least half of their support. The survivor’s benefit stops when your biological, adopted or stepchildren reach the age of 18, or, if they are still in high school, until they graduate or two months after their 19th birthday, whichever comes first.