Debunking 6 Social Security Retirement Myths

VaselineSeptember 16, 2024

0 4 minutes read

Debunking 6 Social Security Retirement Myths

Collecting Social Security benefits is an important component of any retirement income withdrawal strategy, but the federal program can also be complicated to understand.

When it comes to how the benefit works, misconceptions are common and widespread. There are also many competing views on how best to use the program’s benefits.

Your Ameriprise financial advisor will provide guidance on how Social Security fits into your larger retirement income strategy.

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Here are six myths about Social Security — debunked:

Although the solvency of the Social Security program is an ongoing topic of conversation, if you are already retired and receiving Social Security benefits, it is unlikely to materially affect you.

If you’re not yet retired, your financial advisor will continue to monitor how much the changes to Social Security could affect your plan. They will work with you to regularly review and update your retirement income strategy to address any regulatory changes and make proactive adjustments.

While it can be an additional source of income for retirees, Social Security is unlikely to provide enough income for most people. Social Security is one piece of the retirement puzzle, and retirees often need other income streams to maintain their desired lifestyle.

As you approach retirement, your financial advisor will work with you to incorporate your Social Security benefits as part of your planning and budgeting. They will provide a personalized retirement income strategy that takes into account various sources of income and incorporates a flexible, fiscally diversified approach.

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Unlike other sources of retirement income, monthly Social Security payments are designed to keep up with cost-of-living increases. Each year, the Social Security Administration evaluates inflation data and decides whether to institute a benefit increase called a cost-of-living adjustment (COLA). Since 1975, COLAs have ranged from 14.3% (1980) to 0.0% (2009, 2010, 2015).

For 2024, Social Security benefits will increase by 3.2%, according to the Social Security Administration.

No matter when you choose to start receiving benefits, you cannot outlive Social Security. You’ll receive payments every month until you die. Unlike other income streams, it’s backed by the federal government and designed to keep up with inflation.

Although you can start taking Social Security at age 62, the longer you wait to start collecting your payments, the higher the monthly benefit. Many retirees tend to delay until age 70, when they receive their maximum benefit amount.

However, while waiting to collect Social Security benefits may be beneficial for some, it is not the right choice for everyone. Here are some factors to consider when deciding on the age to start collecting payments:

Capital Gains and IRA Withdrawals
Health problems
Life expectancy in your family history
Variation in tax rates on social security income

It’s generally wise to meet with your financial advisor five years before your expected retirement date so you can begin planning your Social Security income strategy. One year after retirement, you’ll work with your financial advisor to decide the exact age to start claiming benefits.

Even if Social Security is paid through a federal government program, you may have to pay income taxes if your modified adjusted gross total income is above certain limits. Up to 85% of your Social Security benefits may be taxable, depending on the amount of income you have from other sources.

About 40 percent of people on Social Security must pay income taxes on their benefits, according to the Social Security Administration. (1)

Questions to Ask an Ameriprise Financial Advisor During Your Initial Complementary Consultation

How and when should I start factoring Social Security payments into my future retirement strategy?
At what age should I start collecting my Social Security payments?
I’m further away from retirement. Should I rely on Social Security as my future source of income? If so, how do I calculate the potential value of my benefit?

When you’re ready to contact an Ameriprise Financial, Inc. financial advisor. for a free initial consultation, consider these questions at your appointment.

Find a counselor

If you have questions about when to start collecting Social Security or how this income will fit into your larger retirement plan, contact your financial advisor.

(1) Retirement Benefits, Social Security Administration, 2023: https://www.ssa.gov/pubs/EN-05-10035.pdf

Ameriprise Financial, Inc. and its affiliates do not provide tax or legal advice. Consumers should consult their tax advisor or attorney regarding their specific situation.

The initial consultation provides an overview of financial planning concepts. You will not receive written reviews and/or recommendations.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations or guaranteed by any financial institution, and involve investment risks, including possible loss of capital and fluctuations in value.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.

The third party companies mentioned are not affiliated with Ameriprise Financial, Inc. This content was provided by Ameriprise Financial, Inc. Kiplinger is not affiliated with or endorses the company or products mentioned above.

VaselineSeptember 16, 2024

0 4 minutes read

Vaseline

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