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4 Common Social Security Myths You Need to Stop Believing (Plus the Actual Truth)

Matt Wiley | DEC 5, 2018

Rumors about Social Security are greatly exaggerated and make their rounds every few months. We've debunked some of the most common rumors you've probably heard.

 

Myth 1: Bankruptcy is Imminent

The root of this rumor lies in our ever-shifting economy and demographics. Slumps in the economy reduce contributions to the social security trust fund, causing a panic among those who look at a single point on a graph without taking into account that changes are cyclical and downswings are followed by upswings.

 

Myth 2: Social Security is Mandatory

The law as it was originally written did not apply to all workers, so if you worked in a field that did not have mandatory participation and wanted to be eligible for benefits later in life, you could participate voluntarily. Over time, however, Congress added more and more jobs to the list of mandatory participants, leaving precious few exceptions for some government employees.

 

Myth 3: Social Security Taxes are Deductible

This was never part of the law, expressly forbidden in the original bill passed in 1935. Another promise that was never made is that the social security tax rate was fixed at 1% of the first $1,400 of income. This was the starting point, and the original law made provisions for the tax rate and income level to increase over time. Those original income and rate limits have been adjusted by Congress and signed by various presidents over the past 80+ years. 

 

Myth 4: You Should Take Social Security as Soon as You Can

The SSA clearly indicates that, aside from extenuating circumstances, the earliest you start receiving Social Security is 62 years old, and you’ll lose 30% of the benefits for that year. Your benefits at age 62, 66 or 67 are not your maximum benefits, though. Benefits increase by 8% per year every extra year you wait. The maximum benefit kicks in at age 70.


The Best Way to Navigate Social Security Benefits and Taxes

Financial advisors are well-versed in Social Security planning and can help you determine when is best to elect your benefits and how to avoid tax traps.

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SmartAsset - copyright 2018

SmartAsset - copyright 2018

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