Myths and Facts about Social Security
Myth: Social Security will provide most of the income you need in retirement.
Fact: It’s likely that Social Security will provide a smaller portion of retirement income than you expect.
According to the Social Security Administration, more than nine out of ten individuals age 65 and older receive Social Security benefits. Whether retirement is years away or just around the corner, keep in mind that Social Security was never meant to be the sole source of income for retirees. As President Dwight D. Eisenhower said, “The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built.” No matter what the future holds for Social Security, focus on saving as much for retirement as possible by contributing to tax-deferred vehicles such as IRAs, 401(k)s, and other employer-sponsored plans. When combined with your future Social Security benefits, your retirement savings can help ensure that you’ll have enough income to meet your needs.
Myth: If you earn money after you retire, you’ll lose your Social Security benefit.
Fact: Money you earn after you retire will only affect your Social Security benefit if you’re under full retirement age.
Once you reach full retirement age, you can earn as much as you want without affecting your Social Security retirement benefit. But if you’re under full retirement age, any income that you earn may affect the amount of benefit you receive:
If you’re under full retirement age, $1 in benefits will be deducted for every $2 you earn above a certain annual limit. For 2011, that limit is $14,160.
In the year you reach full retirement age, $1 in benefits will be deducted for every $3 you earn above a certain annual limit until the month you reach full retirement age. If you reach full retirement age in 2011, that limit is $37,680.
Myth: Social Security benefits are not taxable.
Fact: You may have to pay taxes on your Social Security benefits if you have other income.
If the only income you had during the year was Social Security income, then your benefit generally isn’t taxable. But if you earned income during the year (either from a job or from self-employment) or had substantial investment income, then you might have to pay federal income tax on a portion of your benefit.
For more information about social security benefits, visit the SSA’s website at www.socialsecurity.gov or call 800-772-1213.