Writer Philip Moeller spent two years researching “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” a book he co-authored and published in February 2015. One of his most “interesting” discoveries? The fact the Social Security Administration (SSA) often provides wrong information about its own retirement benefits program.

To be honest, we’re not surprised by this revelation. With literally thousands of claiming options and more than 2,700 rules in the Social Security Handbook, giving pre-retirees the right advice for their specific circumstances can be extremely difficult to do when you have millions of customers to serve. The good news?

Because Financial Engines recognizes the complexity of Social Security — as well as the importance it plays in the lives of millions of senior Americans — we’ve started offering Social Security optimization as one of our enhanced retirement planning services.

In fact, some of our clients have already benefited from our assistance. Check it out:

One of our advisors in San Antonio met with a couple that was absolutely convinced they needed to take Social Security early. Following an in-depth, in-person meeting, we were able to suggest a different strategy that would yield them $200,000 more during their retirement years than their initial plan would have provided. Needless to say, they were thrilled they spoke to us!

We’ve heard a number of myths about Social Security and would like to put the rumors to rest once and for all. Then, when you’re ready, sign up for our FREE Social Security Guide to receive a personalized claiming strategy tailored to your exact situation. At no cost to you, what do you have to lose?

Without further adieu, let’s take a look at seven of the top Social Security myths — and the truth behind each:

1. Benefits are based on my 10 highest-earning years. FALSE! After adjusting your earnings to account for changes in average wages since the year in which you earned them, Social Security calculates what’s known as your average indexed monthly earnings (based on your 35 highest-earning years) and applies a formula to determine your primary insurance amount. 

2. Social Security is going broke, so I better collect now. FALSE! It’s no secret Social Security is facing some issues; in fact, in a summary of its 2014 Annual Report, the SSA admitted that without some type of reform, benefits will need to be cut by 23% in 20331. That being said, the chances the program will cease to exist entirely are extremely low.

3. If I’m divorced, I can’t collect benefits from my ex-spouse. FALSE! Provided a marriage lasts at least 10 years, you can claim Social Security benefits based on the working record of a former spouse so long as you meet the following conditions: you’re currently unmarried, both you and your ex-spouse are 62 years of age or older AND you’re not entitled to higher benefits on your own record.

4. If I work and earn more than $15,000 while also receiving Social Security, my payments will stop. FALSE! However, if you have other income — such as part-time wages or self-employment — in addition to Social Security, you could be subject to federal income taxes. How much depends on your tax-filing status and total combined income. At the end of the day, you’ll never pay tax on more than 85% of your Social Security benefits.

5. I will have more money if I claim Social Security early. NOT NECESSARILY! While we can’t give you exact numbers without knowing the particulars of your situation, we can tell you this: collecting at 62, the earliest age anyone can claim Social Security, probably means you’ll collect less money over your lifetime. That’s because your monthly payout will be about 30% less than if you waited until full retirement age. Life expectancy plays a factor, too.

6. I’m not eligible for Social Security benefits because I was a stay-at-home parent. FALSE! You need to make a certain amount of money each year to earn a certain number of Social Security credits; in other words, if you didn’t work long enough and accrue enough credits to qualify, it’s true you won’t be eligible to receive benefits — based on your own working record, that is. However, if you’re married, you can claim spousal benefits worth up to 50% of the benefits your husband or wife receives, so by no means are you excluded from Social Security.

7. Social Security is all I need to live on in retirement. NOT NECESSARILY! On average, Social Security replaces roughly 40%2 of your pre-retirement income — but common advice suggests you’ll need at least 80% to live comfortably. While it’s a reasonable starting point, depending on your expenses and goals for retirement even 80% may not be enough.

Social Security Guide Six Essentials to know

That’s why it’s so important to work with a professional investment advisor to help calculate a retirement savings goal AND a strategy to achieve it.

Unfortunately, less than half of workers (44%) report having determined how much money they’ll need for their golden years — although workers who HAVE tend to have higher levels of savings3.

Social Security may end up playing a big role in your retirement strategy, but that doesn’t mean it should be your only source of future retirement income. For help developing a plan to reach your retirement goals that doesn’t rely solely on Social Security, contact a local advisor with Financial Engines today.

1 Social Security Administration. “The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.” Web: http://www.ssa.gov/OACT/TR/2014/tr2014.pdf.
2 Social Security Administration. “Retirement Planner: Learn About Social Security Programs.” Web: http://www.ssa.gov/planners/retire/r&m6.html.
3 Employee Benefit Research Institute. 2014 Retirement Confidence Survey®. Web: http://www.ebri.org/pdf/surveys/rcs/2014/rcs14.fs-6.prep-ret.final.pdf.
The information provided is general in nature, is for informational purposes only, and should not be construed as legal or tax advice. Financial Engines does not provide legal or tax advice. Financial Engines cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Financial Engines makes no warranties with regard to such information or results obtained by its use. Financial Engines disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.