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What you don’t know about Social Security could cost you tens of thousands of dollars in retirement income, according to a new survey.
“What is being overlooked are just the basics, namely social security and retirement age,” Christian Worstell, content writer for HelpAdvisor.com and author of the report, told Yahoo Money. “There is a lack of awareness around this.
Six in 10 seniors agree that the Social Security program is “hard to understand and confusing”, while only 12% of seniors disagreed with the statement. This confusion could jeopardize their financial security in retirement.
The survey, which interviewed 1,000 Americans aged 55 and over, found that there are four common misconceptions about Social Security shared by Americans.
When full benefits begin
Two in three Americans mistakenly believe that full Social Security benefits go into effect at age 65, which is up to two years late for some people. The effective age of entitlement to full benefits is 66 for people born between 1943 and 1959 and 67 for those born after 1960.
“We’ve always associated the age of 65 with this magical age where we retire and get Social Security and Medicare,” Worstell said. “We all think our grandparents retired at 65 and our parents retired at 65, so we’re going to do that too.”
What people don’t realize is that it’s been 14 years since full benefits arrived with a 65th birthday and the eligibility age has slowly increased over the years. Many “could really be in for a rude awakening” if they thought age 65 was the finish line, Worstell said, and might prompt some to take benefits before they reach retirement age at full rate.
But asking for early benefits means leaving money on the table. Take, for example, a 65-year-old man who starts collecting Social Security benefits this year, he would only receive 91% of his total retirement benefit amount, missing $ 1,667 in 2021 alone. This means over $ 25,000 in lost income if they live another 15 years and over $ 50,000 in lost income if retirement lasts 20 years.
“[That’s] a grandchild’s school fees, or the vacation of a lifetime, or it could be medical bills, ”Worstell said.
How much does Social Security pay after the death of a spouse
Many Americans have no idea that the Social Security death lump sum payment is a one-time payment of just $ 255. Two in five respondents thought they would receive at least $ 500, with one in six counting on $ 5,000 or more.
The overestimation of the elderly is “understandable,” Worstell said, given that the median cost of a funeral is over $ 9,000 and many Americans assume the payment will be close to covering funeral arrangements.
This means that some seniors do not plan for end-of-life expenses through savings or insurance, and may need to turn to crowdsourcing because they are not “sufficiently prepared for it.” cost of the funeral, ”Worstell said.
When survivor benefits come into effect
One in three seniors mistakenly believes that survivor benefits begin the month of their spouse’s death rather than the month the survivor files their case with the Social Security Administration.
Delaying claiming survivor benefits for as little as a month can result in a loss of almost $ 4,000 – if you receive the maximum benefit – and more than $ 1,500 for the standard amount. There are also no retroactive payments, so each month after death is another month of missed income.
What are the benefits of social security included
More than one in three seniors mistakenly thinks that social security benefits include health insurance coverage.
“We have the idea engraved in our heads that Social Security and Medicare are one and the same,” Worstell said. “While there is a lot of cross-pollination between the two programs, they are separate programs; you must register for Medicare and there is no actual health insurance coverage included in Social Security.
Since the programs are separate, enrolling in Social Security and Medicare is not a two-for-one application process. In fact, Medicare coverage comes with a specific enrollment window, and seniors can incur late penalties for late enrollment.
Missing the enrollment window of just 12 months could cost a senior over $ 350 per year, according to the findings, which would continue for the rest of their life and increase as Medicare Part B premiums rise.
Stéphanie is a reporter for Yahoo Money and Having dinner, a new personal finance site. Follow her on Twitter @SJAsymkos.
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