A few days ago I did a talk at our local Senior Center. When I was first asked to speak my thought was, most of these people are already retired and collecting Social Security, they don’t need my help. But, I found that there was still confusion on a number of issues, even though most of the attendees were already participating in Social Security.
We had a lively question and answer session after the talk. It was open to the public, so not everyone had applied for Social Security yet.
First, there was confusion as to the maximum benefit you could receive. One person thought the maximum was at Full Retirement Age because that is when Social Security deems you eligible for your full benefit. Makes sense, right? But you are able to get more. For every year you wait to apply after Full Retirement Age you get an 8% increase in your payment until age 70. That means you can increase your monthly payment amount by 32% for the rest of your life.
Not everybody can or should wait until 70. It’s a personal decision, and there’s no right or wrong. But it is good to know the facts so you can make an educated choice.
Another misconception was the penalty associated with working while you are collecting Social Security. Some thought that you were penalized until you reach age 70, but the truth is that the penalty stops when you reach your full retirement age.
Many people think the penalty always applies and make decisions about whether to work or not based on incorrect information. They think if the government is going to take half of what I earn, why should I work?
The penalty only exists if you collect Social Security ‘before’ your Full Retirement Age. Afterwards you can make as much as you want, and there is no penalty at all. This penalty exists to discourage people from collecting early and continuing in their full-time job at the same time. So can you work and collect Social Security? Absolutely!
When we talked about how Social Security calculates your benefit, and that anyone can go online and view their entire working history, one gentlemen was very concerned. He had a real fear of putting his personal information in to open an account with Social Security. He was afraid his privacy would be breached. I hate to break it to you, but Social Security already knows an awful lot about you. When you open an account, it’s so you can get information from them, not the other way around. The IRS reports your income every year. They know where you lived, they know where you worked and they know every penny you have declared. Don’t let this fear stop you from getting the information you need to plan ahead.
So the truth is that baby boomers are not the only ones who need clarification of the basics of retirement. Everybody does, and I believe that by sharing what I know I can help make the process easier and give people a better understanding so that they can make good retirement decisions. Tune in next time for more tips.