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Worried about your retirement? Don't fall for the misconceptions about social security. Join Ralph Estep, Jr., and learn the truth behind common social security myths and protect your future.
Worried about your retirement? Don't fall for the misconceptions about social security. Join Ralph Estep, Jr., and learn the truth behind common social security myths and protect your future.
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EP 61 - Five Common Social Security Myths that Will Ruin Your Retirement
[00:00:00]
Here's the question. Do you believe in some of the most popular, social security myths. Could you be putting your retirement in jeopardy by falling for these myths? Well, today we have an important topic to discuss the can greatly impact your retirement.
We'll be uncovering the truth behind five common social security myths that, if believed. Could ruin your retirement.
None of us want that. So, grab your notepads, get ready to debunk these misconceptions.
Stay tuned to find out more.
Before we dive into the myths.
Let's take a [00:01:00] moment to understand the significance of social security and retirement. You know, in a lot of my clients, that is one of their sources of income. The truth is social security is a vital component of many individuals, retirement income strategy. It is by far. one of the greatest components of that. It provides a steady stream of income to eligible retirees.
Those who are disabled as well as survivors of deceased workers.
However, there are a bunch of myths circulating that can mislead people and negatively impact their retirement planning.
Now we're only going to handle five of them today. But I felt like these five are important myths to talk about. And debunk before people get themselves into a problem with their social security.
So let's start with myth. Number one.
Social security will cover all of your retirement expenses.
Well, the truth: is contrary to popular belief. Relying solely on social security for retirement. Income is not going to be sufficient.
I talked about this. A few weeks ago, when a podcast I did on 10 myths about retirement. [00:02:00]Social security is not designed to replace all of your income.
It was designed to replace only a portion. Of your pre-retirement income. So it's important to have other sources of income. Well, you might ask Ralph, what do those include personal savings. Investments, pensions, and other things that you've set aside for retirement, you cannot rely solely on social security. If you do, you're going to
find yourself in trouble.
Let's move on to myth. Number two.
Claiming social security early is always the best
option. Well, this one, we need to talk about folks. You can claim social security at age 62. The problem with doing that. Is you are going to reduce your monthly payout for the rest of your life. So the age at which you choose to claim benefits can have a significant impact on your amount you receive throughout your retirement.
if you click in at 62, let's just use a simple example. Let's say for sake of our example, that. Your full retirement age is [00:03:00] 67 years old. And if you wait till you're 67. Your social security benefits are going to be $2,000 a month. If you decide to take those social security benefits at 62. You're going to get 25% less benefits.
So basically you're going to lock in at $1,500 a month. For the rest of your life. Now, if you wait until full retirement age, you're going to get the full 2000. And if you wait even longer till age 70, you get an additional 25%. So claiming social security early is not always the best option. Now that said sometimes it is the best option, but it depends on your particular circumstances.
For example. If you have health issues and you're not going to live a great deal longer. Well, it probably makes sense to take your social security early. If you look around your family and you're the oldest person in your family, and most people don't live to be very old. Probably make sense to take your social security early, but again, This is an individual [00:04:00] thing.
So overall, the myth about claiming social security early is always the best option. I have to debunk that one.
Let's move on to number three.
Myth number three says social security is going to go bankrupt.
Well, the truth is that's a common misconception. You hear about it all the time in the press. I hear about it all the time I practice, people say to me constantly, I'm not going to wait for social security. I'm going to take a now Ralph, because it may not be around long. It's going bankrupt. Well, I don't believe that's the case, but that said. It's important to note that so security is a pay as you go system. Well, what does that mean, Ralph? It means that current workers' contributions fund the benefits of current retirees.
So basically those who are working now, Are paying into the system and that money is not even hitting The bank account very long before it goes back out to current retirees. So there is some credence in saying that the program does face some challenges. There are demographic issues that . Are going on right now, we have an aging [00:05:00] population. But overall now that said, I think they're going to have to make some changes now.
What does that look like? You know, maybe they increase. The full retirement age to 70. as we have a population that's living longer that may need to be addressed. They may have to address who gets benefits based on your income. I'm not saying that I'm a proponent. Or against those things, but the truth is. I really don't believe that they're going to allow social security go bankrupt has too many people that are relying on that for
a very strong source of their retirement.
So I'm going to debunk myth. Number three, that social security has gone bankrupt. But there's honestly people who disagree about that.
So let's move on to myth. Number four.
You can't work and receive social security benefits at the same time.
I've heard this routinely. The truth: is many individuals believe that once they start receiving social security benefits, they must stop working. However, that is not entirely accurate.
While there are restrictions and income thresholds. It's [00:06:00] possible to continue working and receive social security benefits simultaneously. you can do both. Understanding the rules and planning accordingly can help maximize your overall retirement income.
Here's what you need to know. If you retire early at 62. There is an earnings cap. It's a little bit over $20,000 right now. If you make over that earnings cap. You are going to lose benefits. So you have to really think about this decision to take social security early. Now. That said you can still work.
Now, once you hit full retirement age, whatever that age is for, you could be 66, 66 and a half 67. Then you can work as much as you want. There's no restrictions on how much you can work. You know, you're not going to lose any benefits. Now, all of that set. There are tax consequences to this, which is what we're going to talk about in myth.
Number five. So I'm going to have to debunk myth number four, that says you can't work and to get so security at the same time, that's just not true.
Let's move on to myth. Number five.
Social security benefits are not taxable. [00:07:00] Let me just tell you folks, this is a big surprise, surprise as Gomer Pyle used to say.
When I was a kid watching TV. So security is taxable. if your income is a certain level, You may have to pay tax, on your
social security could be up to 85% of your benefits. So what does that mean? If you have substantial income from other sources, such as pensions. Investments, or part-time work. Part or up to 85% of your benefits could be taxable.
And this comes as a surprise to people. 'because that amount of other income. It doesn't need to be a big number, could be as little as like 25, 20 $6,000. And then all of a sudden. You've got this. What I call the double whammy. Where you're having to pay tax on your social security. And you didn't realize it.
it is very common. At tax time for people to come in to see me who were in their first year retirement and owe a ton of tax to the IRS because they didn't know about this situation. So it is absolutely important to [00:08:00] consult with a tax professional to understand your specific situation. And the potential tax implications. of that.
And while we're here, let me just remind you if you're interested in using me for your tax services or consultations. You can go to our website. That's askralphpodcast.com/store. There you can schedule an appointment with me and I can help you with your taxes or other financial questions. So now we've debunked, the social security myths.
It's time for you to take control of your retirement planning. Well, how do you do that, Ralph? Educate yourself, understand the ramifications of each of these decisions in each of these myths that we've debunked. Seek professional advice. this is not something that. You're going to just figure out on your own.
It's important to talk to a professional and make informed decisions. These informed decisions need to align with your financial goals. Remember this, your retirement is too important to leave to misconceptions. Take the time to invest in understanding. I talk to someone like myself, talk to a financial expert who can help guide you through the process,
A couple of things we talked about today, number [00:09:00] one, It will cover all your retirement expenses.
That's just not going to happen for most people. So you need to work with a financial professional to help put together a plan. If you're younger, it's even a better time to do that. We talked about number two, withdrawing it early is always the best option. It probably may not be, or it may not be for sure. So that's something you want to talk to a financial professional about and look at your options. Don't assume that social security is going to go bankrupt.
I think that's just a bad plan. I think it may. A may have struggles and it doesn't need to be your first line of income in retirement, but I really, I don't think it's going to go bankrupt. We've already talked about. You can work. And collect social security benefits at the same time. But we talked about, we know what that looks like.
If you retire at 62 versus full retirement age. And finally we talked about the tax consequences. So you need to understand those and plan accordingly. Maybe you need to have federal tax withheld from your social security. Maybe you need to make quarterly tax payments. So you don't get that big surprise surprise at the end of the year. So before [00:10:00] we wrap up, today, I want to remind you to visit our podcast page.
You'll find our show notes there. That's at askralphpodcast.com. I encourage you to go there, and visit. You can sign up for email list, which is a great thing to do right now as we're doing a $25 weekly gift card drawing. for Amazon. So sign up for our email list and you could be entered to win. If you know, somebody that would benefit from the program, have them sign up as well. You can also schedule a consultation with me.
Like I mentioned, that's at askralphpodcast.com/store.
And let's talk about our question of the month. We introduced this a few days back. We're asking for you to provide your response to this question. And the question is, what do you find is the most difficult part of creating and more importantly, living within a budget? So, how do you answer me?
You go back to our website, you'll see a little icon down at the bottom, right? That's a microphone icon. And just record your message. You know, it doesn't have to be perfect. Just say what's on your mind and we'll include you on our show in March, when we talk about the question of the month.
So that wraps up today's [00:11:00] episode.
I hope you found this discussion of the five common social security, myths, enlightening, and more importantly, empowering.
So what I always say at the end here. Stay financially savvy. And until next time, God bless. you.
