(WTHN) — Local financial professional Roger Cowen debunks three common social security myths to help you better prepare for retirement.
Myth 1: Social Security alone will provide me with enough income in retirement.
- Social Security is only designed to replace about 40% of your income, and most people will likely need as much as 80% of their pre-retirement income to maintain the lifestyle they want in retirement.
- The average Social Security benefit for retired workers in 2019 is $1,461 a month, which adds up to $17,532 for the year.
- You should not rely on Social Security alone to get you through retirement. It’s important to fund your personal retirement savings during your working years.
Myth 2: I should claim Social Security at age 62.
- While retirees are eligible to start receiving benefits when they turn 62 (you can apply three months prior to your birthday), that doesn’t mean they should.
- To receive your full monthly benefit, you must wait to claim until full retirement age, which is somewhere between 66 and 67.
- According to Cowen, only 67% of people in a recent survey did not know their full retirement age.
- The bottom line is, you don’t have to take Social Security just because you’re retired, but you should have a plan in place with the proper strategy for your unique situation.
Myth 3: I don’t have to pay taxes on my Social Security benefits.
- If Social Security is your only source of income, this is likely true.
- However, for retirees who are also receiving income from a tax-deferred retirement account like an IRA or 401(k), the IRS will likely be collecting taxes on your benefits.
- The quickest way to see if you will pay taxes on your benefits is to determine your combined income. Take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest.
- You will never pay taxes on more than 85% of your Social Security income.
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