Beyond the Myths: What You Really Need to Know About Social Security
When it comes to retirement planning, few topics generate more questions and confusion than Social Security. As advisors, we frequently hear concerns from clients about their benefits, often fueled by headlines or well-meaning but misguided advice from friends and family.
Let’s clear up some of the most common misconceptions we encounter and help you make more informed decisions about your retirement future.
1. “Social Security Won’t Be There When I Need It”
This might be the biggest myth we hear, especially from our younger clients. While it’s true that Social Security faces future funding challenges, the reality is far less dire than many headlines suggest. Even in a worst-case scenario, payroll taxes would still fund a significant portion of promised benefits.
The system isn’t “running out of money” – it’s facing adjustments that Congress has time to address. Understanding the true status of Social Security can help you make more confident retirement planning decisions instead of making fear-based choices that might compromise your long-term financial security.
2. “Social Security Benefits Aren’t Worth Much”
Many of our clients are surprised to learn the true value of their Social Security benefits over time. For a married couple retiring today, lifetime benefits could reach well over $1 million in total payments. Even for higher-income households who have substantial savings, Social Security often plays a crucial role in providing reliable, inflation-adjusted income throughout retirement.
The key is understanding how to maximize your benefits within your overall retirement strategy – something your advisor can help you evaluate based on your specific situation and looking at your entire financial picture.
3. “I Should Claim As Soon As Possible at 62″
While you can start benefits as early as 62, that’s not always the optimal choice. Every year you wait between 62 and 70, your benefits increase substantially. However, the right claiming strategy isn’t just about maximizing the monthly payment – it should consider factors like:
- Your overall retirement income plan
- Your spouse’s benefits
- Your health and family longevity
- Your tax situation
- Your other retirement assets
This complexity is precisely why Social Security planning should be part of your broader retirement strategy discussions.
4. “Once I Make My Claiming Decision, I’m Stuck With It”
This myth can lead people to delay making any decision out of fear of making the wrong choice. In reality, there is some flexibility:
- You may be able to withdraw your application within 12 months of filing
- There are special rules that can allow for changes at full retirement age
- Strategies exist for adjusting your approach as circumstances change
Understanding these options can help you make more confident decisions about when to start your benefits.
5. “Spousal Benefits Are No Longer Available”
While some advanced claiming strategies were eliminated in recent years, spousal benefits remain an important planning opportunity. A lower-earning spouse can still claim up to 50% of their higher-earning spouse’s full retirement age benefit. This can be particularly valuable when there’s a significant difference in earnings history between spouses.
Making Social Security Work for You
These myths only scratch the surface of Social Security’s complexity. The reality is that Social Security claiming decisions can have a profound impact on your retirement security, potentially affecting:
- Your lifetime income
- Your tax situation
- Your spouse’s future benefits
- Your overall retirement lifestyle
At Prosperity Capital Advisors, we believe Social Security optimization should be part of your holistic financial plan. Your claiming strategy should align with your other retirement assets, tax planning, and long-term financial goals.
Take the Next Step
Ready to develop a Social Security strategy that works for your unique situation? Prosperity Capital Advisors can connect you with a qualified, holistic financial advisor in your area who can help you navigate these important decisions.
Find an Advisor to connect with a Prosperity Capital Advisors wealth manager near you.
This article is for informational purposes only and does not constitute tax or investment advice. Please consult with your financial advisor about your specific situation. Prosperity Capital Advisors does not provide tax or legal advice.