Learn about your Social Security Benefits.

Check your Social Security savvy by looking over these five statements to see if you can determine which are true and which are false.

Statement: You can sign up for Medicare without taking Social Security benefits.

True: If you would like to apply for Medicare, but suspend Social Security payments, you can do that. However, understand that your Medicare Part B premium is typically withheld from your monthly Social Security benefit. So you must be sure to always pay your Part B premium. If you do not, according to Larry Kotlikoff, an economist at Boston University, there’s a chance that Social Security will reactivate your Social Security benefit, withhold the premium and deny you the delayed retirement credit – all without contacting you first. Timely payments for Part B are a must. 

Statement: All those taxes that are taken from your check are put in a retirement account for when you retire.

False: While your tax dollars do fund Social Security, they do not directly fund your retirement. Social Security works on a “pay-as-you-go” basis. When you retire, the Social Security taxes of the current workforce support your retirement – just as a portion of your income taxes supported those who retired before you. 

Statement: By waiting to collect Social Security until your full retirement age, extra money gets added to your benefit.

True and False: This has some elements of both true and false to it. By starting your benefit payments before you reach full retirement age (between 65-67 depending on your birth year), you are receiving a reduced monthly payment. When you wait to begin collecting Social Security at your full retirement age, you are receiving 100 percent of your benefit based on your income history. So though it does increase, it’s not technically “extra” money that the government is giving you. It’s simply your full and actual retirement benefit. You could think of it as less money each month over an extended period of time versus more money over a shorter period of time. Over the long-term, this is a wash for someone with an average life expectancy.

Statement: If I keep working while collecting Social Security benefits and go over the earnings limits, I lose that extra money.

False: If you collect Social Security before full retirement age and continue to work, there’s a limit on what you can make before Social Security withholds money. However, once you reach full retirement age, your benefits will be recalculated, and you will receive your full payment. Your payment will include credit for those months in which benefits were withheld.

The 2018 annual income limit is $17,040¹. Once you go above $17,040, Social Security holds back $1 in benefits for every $2 you earn above this figure. In the year you’ll reach full retirement age, the cap changes to $45,360. This time, the formula is $1 held back for every $3 that you earn over the limit. Once you reach full retirement age, no cap on earnings is applied.

Statement: You should wait to collect Social Security benefits, no matter what.

False: While it is true that your monthly benefit will increase by waiting to collect until your full retirement age up to age 70, there are additional things to consider. For example, if you’re out of work and in need of additional income, it may be better to collect Social Security than withdraw from your 401(k). In addition, life expectancy can play a large part in when you decide to collect: a smaller amount for a longer period of time may end up being more overall. Talk to your financial planner about these issues and decide on the appropriate plan for your financial situation.