9 Social Security myths worth busting

The breakeven point, generally speaking, represents the age at which a retiree taking benefits before age 70 would begin to have less money over their lifetime than if that same retiree had waited.

The reverse is also true: The breakeven point represents the age at which a retiree waiting until age 70 begins to have more money over their lifetime than if he or she had elected to take benefits earlier.

“Most people I talk with get the breakeven point and the tradeoff between taking money now and getting a lower amount forever vs. waiting and getting a higher amount — with the breakeven point representing the crossover [or intersection] of the two strategies,” Lonier explained.

Lots of people, he says, believe they won’t live to the breakeven year.

However, many are on the high side of the life-expectancy spectrum, even if they have a chronic illness, the advisor adds.

“And it’s worth factoring in the benefits of tax-advantaged dollars from Social Security into the breakeven analysis. That could move the breakeven closer to age 80, for some people,” he explained.

“Those who think they will just live to 82 and get to 85 or 90 really will get less money than they expected if they took Social Security too early,” Lonier said. “They will then really need longevity insurance or another source of income.”

6. You don’t need to maximize monthly Social Security benefits because you’ll be spending less in retirement.

Some retirees expect to spend less, since they have paid off their mortgage, are not paying college tuition for children and can even turn to their kids for support if needed.

“Retirement planning is more complicated than this,” Lonier said. “You have two components — cash flow and income, which is Social Security and maybe a pension and financial capital.”

For each retiree, of course, the income and expenses vary.

“Some people can live frugally, have lower expenses than income and will do fine,” he explained. “But if they are leveraged, meaning they spend furiously and run up credit-card debt — and that their spending exceeds their income — they will do poorly.”

When retirees’ spending exceeds their income, there’s trouble. “It’s that simple,” Lonier said.

“Again, this is why we advise people to wait longer to get more money from Social Security to cover expenses with higher income. It’s worthwhile to try and delay Social Security.”

As for spending, even retirees have paid off their principal residence, there are other costs to consider for cars, pets, other homes and so on.

7. Getting Social Security means you don’t have to worry about spending a lot of money on health care since you’ll be getting Medicare, too.

While acknowledging that health care spending and expenses are “a complex subject,” Lonier says: “The bottom line is that they are going up. For example, Medicare Part B premiums increased this year.”

Of course, Social Security payments do get adjusted for inflation, “but those increases can get eaten up by the Medicare increase,” he explains.

Retiree health care costs depend on a variety of factors, of course, including whether or not someone has a chronic condition such as diabetes.

The current cap on out-of-pocket expenses for those with Medicare Advantage plans, for instance, is $6,700 a year (or as little as $3,400 under some plans).

“We say to people that it’s a good idea to get a cap on your expenses, to get a plan that allows you to know the maximum you can expect to pay out for health care each year,” the advisor stated.

He cautions that those who don’t take care of themselves and suffer from associated health problems will likely pay more out of pocket for health care costs. At the same time, those who do take care of themselves can expect to live longer and should plan accordingly, Lonier says.

8. You don’t need to worry about Social Security, because your kids or other family members can always help support you and even let you live with them, if needed.

 “As with other sources of support, you can’t completely count on children,” Lonier explained. “Of course, nobody knows the future.”

It’s important to get away from the notion that it is acceptable to not plan for the future and assume someone else will fix your problems, he adds.

If children can help out or take care of their parents in the 62-to-70 age range, then the parents can take Social Security at a later age and get higher monthly payments.

“This is what we refer to as multigenerational financial planning,” the advisor stated.

If, for instance, the parents don’t have much savings, but their kids have good-paying jobs, the family can work together on a financial plan.

“They can learn what could cost them less in the long term,” Lonier said. “You can plan holistically and figure out how to fund the early stage of retirement. It all depends on the circumstances.”

9. You can never get the right information on Social Security benefits.

The Social Security Administration website provides pre-retirees and those in retirement with a large quantity of information, fact sheets and more.

It does take a few minutes to create a My Social Security account online, but the account gives you full details on your benefits at different ages. (See SocialSecurity.gov or SSA.gov/myaccount.)

For those who want to get some details on benefits before creating an official SSA account, there’s a quick calculator of benefits online that can be used. (Go here for more information.)

“You can also Google lots of this,” said Lonier. “There is Social Security information everywhere.”

While the SSA now offers most services online, including requests for replacement Social Security cards, it maintains a network of offices nationwide for face-to-face assistance.

The general toll-free number, 800-772-1213, can be reached 12 hours a day from Monday through Friday.

See also:

Blindsiding the public on Social Security

4 things you need to know about the Social Security spousal benefit

Why Bernie Sanders’ Social Security plan doesn’t work

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