Common Mistakes About Social Security
Social Security can be confusing with many people believing many things. We've been hearing that Social Security is about to run out of money and many people believe it. Social Security funds come from taxes collected from our paychecks and from a trust fund of U.S. Treasury securities. It is the trust fund that is in jeopardy not money collected through our paychecks. This means that if the trust fund is depleted, Social Security can still pay 77% of anticipated benefits. Congress will very likely step in to strengthen Social Security's finances.
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Those people who don't think Social Security will be around when it is their time to receive benefits could make bad decisions regarding their retirement planning. The biggest mistake would be to give up on retirement and not save at all. There are other potential mistakes as well.
Planning to save enough without relying on Social Security at all may not be realistic. One would need to save approximately $400,000 to generate today's average Social Security payment or $1464 per month. Couples would have to roughly double those amounts. It is estimated that millennials will receive twice what today's retirees receive.
It might be more reasonable, while cautious, to plan on receiving 70% to 80% of your projected benefits and to save accordingly. This would also make it more realistic to work toward your other financial and life goals.
Don't ignore your Social Security account! Your Social Security benefits are based on the wages you've received during your 35 highest earning years. It is critical that you check your Social Security account to ensure that your earnings have been reported accurately. The sooner errors are reported the easier the fix is likely to be. You can create an account on ssa.gov to check your earnings records.
Fear of the viability of Social Security can induce people to sign up for it as soon as possible. You can start receiving payments at 62 and can apply at 61 years and 9 months for benefits. Your age of enrollment impacts how much you receive so careful consideration is important. Your Social Security benefits increase approximately 7% to 8% per year you wait from age 62 to age 70.
Social Security means that there are decisions to be made and facts and figures to sort out. Discuss your options and seek the help of your financial advisor or accountant.