Social Security Misconceptions to Avoid

John Iekel

Social Security—often cited as a “third rail”—has been a staple of the retirement landscape for almost 90 years. But that doesn't mean that it’s free of misconceptions. A recent commentary highlights some to avoid. 

In “5 Social Security Myths Debunked,” Fidelity points out some common assumptions about the program and why they are erroneous. 

You have to claim Social Security when you reach age 62. While some people believe that is the case, it is not mandatory that one start claiming it at 62, they point out. Rather, while one can do so at age 62, that actually is the earliest age at which one can. 

Social Security benefits are based on wages earned before age 65. Actually, one’s benefits are based on one’s highest 35 years of earnings, regardless of the age one is when one earned them. 

If one claims Social Security, there will be a “bump” in benefits later. Some people believe that if they claim their benefits at age 62, then later their benefits will be higher when they reach full retirement age (FRA). Fidelity points out that the benefits will not increase; however, one can suspend receiving benefits and then resume them later—which could result in higher benefits payments than one had been receiving. 

Your benefits will not equal your contributions into the system. It is possible that this may be the case, but it is not true for everyone under all circumstances, Fidelity says. It points out that Social Security is not a personal savings account; one’s contributions and those of one’s employer provide benefits for current retirees and other Social Security recipients. They also provide a guaranteed lifetime source of income, but there are many variables involved in how an individual’s benefits are calculated. Those who have long lives may end up collecting more than they put in to the Social Security system. 

Divorce means no spousal benefits. This may seem obvious, but Fidelity points out that even if one is divorced, one still could be entitled to spousal benefits under certain circumstances. To wit: If one was married for 10 consecutive years, divorced and remains single, and has reached your FRA, one is entitled to the higher of (1) one’s own benefit; or (2) 50% of the ex-spouses’ Social Security benefit at FRA or personal insurance amount. And, it adds, this calculation has no effect on one’s ex-spouse.