Personal finance

5 Social Security is America’s retirees keep falling – how many are hurting you in 2024?

5 Social Security is America's retirees keep falling - how many are hurting you in 2024?

5 Social Security is America’s retirees keep falling – how many are hurting you in 2024?

Social Security pays benefits to about 68 million Americans, and as of August 2024, the average retired worker collected about $1,920 a month or about $23,000 a year .

With nearly 90% of Americans age 65 and older receiving Social Security as of June 2024, there’s a good chance you’ll be collecting benefits once you’re old enough. I can qualify. For this reason, it is important to understand how Social Security works.

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However, there is a world of misinformation about Social Security and some common lies can derail your retirement plans. Here are some of the biggest lies you need to be aware of and how to debunk them.

1. You can live well in retirement on Social Security alone

It’s common to see your living expenses drop during retirement. You don’t go to work every day during that time, and you may have a mortgage to pay.

But you can aim to replace 70% to 80% of your pre-retirement income during your retirement years. And Social Security alone won’t let you do that.

The Social Security Administration says that on average, the monthly benefits it pays out are 40% of workers’ wages before they retire. But it also cautions that this may vary from person to person. If you have a higher than average income, you may be looking at income from Social Security.

That’s why it’s a bad idea to plan for retirement on Social Security alone. A better bet is to contribute to a retirement savings plan during your working years so you have a nest egg to fall back on.

2. Social Security is collapsing

You may have heard rumors that Social Security is running out of money and will soon stop paying benefits to retirees. The program certainly faces financial challenges that lawmakers must address. But it’s not true that Social Security is on the verge of bankruptcy.

The main source of funding for Social Security is the payroll tax – the tax that workers pay on their wages. Because of this, it is almost impossible for the program to run out of money. Right now, the worst-case scenario on the table is benefit cuts, and those can also be avoided if lawmakers come up with a fix (which they did when Social Security faced cuts in the past). .

For this reason, do not withdraw Social Security for retirement. But if it does, plan to reduce the odds by boosting savings plan contributions.

Read more: These five magic money steps will get you up America’s wealth ladder in 2024 — and you can complete each step in minutes.

3. You cannot claim Social Security if you never work

The way Social Security works is that you get retirement benefits by paying into the program during your working years. But it is possible to collect spousal benefits even if you are not working. You can claim spousal benefits if you are married to someone who is eligible for Social Security, or if you are divorced from someone who is entitled to benefits and your marriage lasted at least 10 years.

Your spousal benefits will not be as large as the benefits you received from your current or former spouse. The maximum spousal benefit you can collect is 50% of your spouse’s full retirement age. And if you file for spousal benefits before retirement, that payment will be reduced. If you are seeking full spousal benefits, be sure to find your retirement age so you know when to claim them.

4. You are guaranteed Social Security as long as you work

Working and paying into Social Security is your ticket to retirement benefits. But you need to meet certain requirements to qualify for benefits later in life.

Specifically, you must accumulate 40 work credits over your lifetime to collect Social Security. And the maximum number of loans you can collect in one year is four.

You should also know that the value of a single employment loan can change from year to year. Currently, a salary of $1,730 gives you one employment loan, but that number may increase based on inflation and salary growth. Consider the value of employment credits if you work part-time but want benefits later.

5. The later you apply for Social Security, the more money you get

You are entitled to receive monthly Social Security benefits based on your earnings history once you reach full retirement age. That age depends on your year of birth. If you were born in 1957 or earlier, you are already eligible. The full retirement age gradually increased from 66 to 67 from 1955 to 1960. For those born in 1960 or later, benefits begin at 67.

You can increase your monthly Social Security benefit by 8% for each year you delay filing your claim for earlier retirement years. But there is a limit to how long the policy is valid.

Once you turn 70, you can no longer add to the delayed retirement benefits that result in additional benefits. So it doesn’t pay to delay Social Security indefinitely. Quitting may just cost you money.

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This article provides information only and should not be considered advice. Offered without warranty of any kind.

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