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In talking with many people that are preparing for retirement, a conversation that always comes up is the topic of Social Security. Last week I shared Myth #1: Social Security will be enough income in retirement. This week I want to clear up two more myths that are prevalent in many people’s minds.
MYTH #2: Social Security is only a retirement program.
TRUTH: Social Security also offers disability and survivor’s benefits.
With all the focus on retirement benefits, it’s easy to overlook the fact that Social Security also offers protection against long-term disability. And when you receive retirement or disability benefits, your family members may be eligible to receive benefits, too.
Another valuable source of support for your family is Social Security survivor’s insurance. If you were to die, certain members of your family, including your spouse, children, and dependent parents, may be eligible for monthly survivor’s benefits that can help replace lost income.
Social Security Death Benefits
According to the Social Security website, there are currently 5 million widows and widowers receiving monthly Social Security death benefits, which for many, is their only stream of income after the death of their spouse.
A widow or widower is eligible to receive benefits:
- as early as age 60 (reduced benefits) or the full amount at the Social Security-determined “full retirement age” (which is between age 65 and 67, depending on the year in which you were born)
- as early as age 50 if disabled (disability must have occurred before death or within seven years of death of spouse)
A surviving divorced spouse can also receive benefits, provided:
- the marriage lasted 10 years or more
- the divorced spouse meets the same age and/or disability requirements as the widow (see above)
- remarriage after the age of 60 (or 50 if disabled) does not affect benefits
Death benefits for children include:
- benefits for unmarried children under age 18 (or under 19 if attending high school full time)
- benefits for disabled child at any age if the disability occurred before age 22
- benefits for stepchildren, grandchildren, step grandchildren, and adopted children under certain circumstances
For complete details on social security death benefits, talk to your financial advisor or visit the Social Security official website.
MYTH #3: If you earn money after you retire, you’ll lose your Social Security benefit.
TRUTH: 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 2013, that limit is $15,120.
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 2013, that limit is $40,080.
For most Americans, Social Security is an important part of your retirement planning, so make sure you understand the difference between myth and fact. There are also many ways to maximize your Social Security benefits.
Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. John Bearss is a retirement specialist. He is also a registered representative of and offers securities through SICOR Securities, Inc., Member FINRA, MSRB, SIPC, 6500 Poe Avenue, Suite 105, Dayton, OH 45414 | (937) 890.3101. Neither SICOR Securities, Inc., Lifetime Decisions Management nor their representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. and SICOR Securities, Inc. are not affiliated.