Social Security is something that should be on your radar whether you're close to retirement age or not. But there's a lot of misinformation circulating about Social Security, and buying into it could lead you astray. Here are a few common myths shouldn't believe.
1. Your filing age really doesn't matter
When it comes to claiming Social Security, you get choices. You're entitled to your full monthly benefit, based on your personal wage history, once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in between, depending on when you were born.
That said, you're allowed to claim benefits at a different age than FRA. The earliest you can sign up is age 62, and you can technically delay your filing indefinitely.
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But don't be fooled into thinking your filing age doesn't matter. If you claim benefits before reaching FRA, they'll be reduced on what's generally a permanent basis. And if you delay your filing past FRA, your benefits will grow 8% a year, up until you turn 70.
Now, imagine you're entitled to a monthly benefit of $1,800 at an FRA of 67. If you sign up for Social Security at 62, that benefit will drop to $1,260. And if you delay your filing until age 70, that benefit will increase to $2,232. All told, in this example, there's a $972 difference between your highest possible monthly benefit and your lowest -- so it's important to choose your filing age carefully.
2. Social Security is going broke
You may have heard that Social Security is rapidly running out of money. And it's true that the program risks depleting its trust funds within roughly the next 10 years.
But the program's trust funds aren't Social Security's main revenue source. Rather, Social Security gets most of its income by imposing payroll taxes on workers. And that's a practice it intends to continue.
As such, the program won't end up running out of money anytime soon. And while benefit cuts are on the table, they're not guaranteed to happen, either.
That's why you shouldn't rush to sign up for Social Security early thinking that doing so is your best option for collecting some money while the program is still around. If you go that route, you could end up with a much lower monthly income throughout retirement.
3. You can live comfortably on your benefits alone
Many people assume they can let themselves off the hook with regard to retirement savings and fall back on Social Security instead. But that's a dangerous decision to make.
It's a big misconception that you can live well on Social Security without other income sources. And if you're not convinced, consider that the average senior receiving benefits today only gets $1,663 a month.
If that sounds like enough to cover your living expenses, then go ahead and neglect your savings. Otherwise, you may want to make a solid effort to start building yourself a nest egg.
The more you know about Social Security, the more financial stability you're apt to attain later in life. It's also important to know what myths to ignore on the Social Security front so you don't wind up making poor decisions that impact your retirement negatively.
