Whether you at the age of retirement or have several years to go, you have more than likely heard a lot of information regarding Social Security. With 50 million citizens receiving benefits and 170 million workers contributing, Social Security impacts many Americans. While many Americans are somehow involved with Social Security, many are uninformed due to the complexity of the program. Here are several common myths regarding Social Security.
1. Social Security will run out – False
Critics of Social Security often say it will run out eventually. Social Security is a system that you pay into through taxes during your working years. Social Security will be funded as long as we continue to pay payroll taxes. One real concern is the imbalance between money entering the system and money leaving the system, however, the US government has been developing a plan to create more of a balance between the two.
2. You don’t have to pay taxes on Social Security benefits – False
While many do not anticipate paying taxes on their benefits, there is an unfortunate reality waiting. Kiplinger states, “If your combined income—that is, adjusted gross income not including any Social Security benefits plus any nontaxable interest plus half your benefits—is between $25,000 and $34,000 for singles and $32,000 to $44,000 for couples filing jointly, you'll owe taxes on up to 50% of your Social Security benefits. If your combined income exceeds the $34,000 limit for singles or the $44,000 limit for couples, you'll owe tax on up to 85% of your benefits.” This does not take into account state taxes, which vary depending on your location.
3. You receive however much you paid in – False
While you may have been in the workforce for over 50 years, you will not receive a dollar-for-dollar match of your contributions. Social Security benefits are based on your 35 highest-earning years. Kiplinger states, “Whether you'll recoup more or less than the amount of tax you paid into the system depends on your earnings and how much tax you paid during your career, your age when you claim benefits, whether you're married, and how long you (and your spouse) live to collect benefits.”
While Social Security is a vital program for many Americans, people are relatively uninformed. As you approach retirement, take the time to research the program and how it works. Our advisors here at Southern Point have experience dealing with Social Security and can help clients navigate the program. If you would like to know more about Social Security or are beginning to take it soon, call us at 229-245-6022 to schedule a consultation with our team.