Some misconceptions about Social Security

Posted on February 22, 2023February 22, 2023 by Danielle

I hear these all the time. Maybe you know all this already, but there’s a lot of misinformation and outdated information, so browse through this as a self-check!

1. You can collect at 65.
Well, technically true—in fact, you can collect at 62, but you’re going to give up a lot. The full retirement age is NOT 65 and hasn’t been since the year 2000. If that one somehow slipped by you, don’t feel bad—most corporations are still designing their retirement programs around age 65 and don’t seem to have caught up with the change, either. If you were born in 1960, or later, your full retirement age is 67.

2. If you’re divorced, you lose all rights to a spouse’s Social Security.
Again, nope. If you were married at least 10 years, you can collect based on your own benefit or ONE HALF your spouse’s benefit as it would be at their full retirement age, whichever is higher. If you claim benefits, the Social Security Administration will give you whichever benefit is higher. Even if your ex-spouse is remarried, you can still collect. If they have multiple spouses, they can ALL collect, and this does not affect yours, theirs, or the ex-spouse’s benefit. You cannot sign away this right in a divorce settlement (and there would be no reason to do so). As long as you do not remarry before age 60, you can choose to collect off the record of whichever spouse (current or ex) has a higher benefit to you.

3. You can choose to collect only a spousal benefit, then switch to your own at 70.
Nope, not anymore. That benefit went away several years ago.

4. A married couple can only get one Social Security benefit.
Again, nope. Each spouse can collect their own benefit based on their work history. If one has a large benefit and the other has a tiny benefit, the spouse with the small benefit will be paid ½ the other spouse’s benefit if higher. Let’s say spouse #1 has a monthly benefit of $2,400 and spouse #2 has a monthly benefit of $900. Spouse #2 will get $1,200. If #2 has a monthly benefit of $1,300 on their own work record, they’ll get $1,300.

5. Once you collect on your own record, you don’t get survivor’s benefits.
If one spouse dies and has the highest benefit, the surviving spouse can collect the full amount of the highest benefit, but will then lose their own. So, the surviving spouse from #4 can collect $2,400, but lose any spousal benefit and will switch from their own lower benefit. For a divorced spouse this is good news, but may be bad news for a married surviving spouse who will now lose some of the income they had as a couple. Don’t depend on Social Security to automatically make this switch–claim it. I’ve seen too many widows who haven’t collected the higher survivor’s benefit for years after they were entitled to it.

6. You’re better off not reporting tips or cash income.
Well, you already know this is illegal. Yes, it probably puts more money in your pocket today, but in the long run you’re screwing yourself out of Social Security benefits as well as (potentially) disability benefits and survivors benefits for your family if you die while the kids are young. Lots of people (hairdressers, food servers, contractors) try to get away with this but if continued for years, really comes back to bite you in retirement benefits. Think again.

7. You should get your money as soon as possible. Social Security will go away.
I first heard this about 45 years ago. Social Security is still here. The American voter (you!) has some say over this—Republicans want to reduce it, make the retirement age even older, and “sunset” the law every 5 years. Yes, Social Security is in trouble, but there are many fixes—including taxing all income, not just amounts under $160,200. Yes, you read that right—people making over $160k pay no further Social Security tax. Maybe there will be changes, but it will probably affect workers earlier in their career, not retirement age. Nevertheless, no one should depend on Social Security for their full retirement income if they can find any way to save.

If you claim early (say, 62) you’re losing about 8% a year in benefits. AND, if you still work from 62 to 63, you give back $1 for every $2 you earn above $21,240. And then there’s that “great” idea that people say they’ll take the benefit and invest it. Will your investments produce a guaranteed 8% return PLUS cost of living increase every single year until your full retirement age and make enough to compensate for your lifetime reduced benefits? Um, no. If you even do save it, which pardon me but I doubt it.

8. I’ll get the dollars it says in my benefit statement.
You’ll get those dollars minus payments for Medicare. So your check won’t actually be as much as your statement says.

9. I don’t need extra health coverage, I have Medicare.
Medicare pays for a whole lot, but not everything—there are deductibles and quite a lot of things it doesn’t pay for. You need some supplemental (known as Medigap) or a Medicare Advantage plan.

10. Medicare Advantage is very low cost or free compared to the Medigap plans. Why shouldn’t I go with it?
Advantage plans can be free, but be sure you look at the deductible, which can be quite substantial, and resets every year. They also have some serious limits on physical and occupational therapy, should you need it. It may be the only choice if policy price is the major consideration, but be aware that it operates much more like an HMO, and your choice of doctors and hospitals may be limited, and procedures denied or reviewed. They may appear to give you a lot of things not covered in a Medigap policy, but this is a teaser for things that are easy and cheap to provide, while they save on more expensive things or choices.

Once you choose an Advantage plan, you generally cannot switch to a Medigap plan. The opposite is not true—those with a Medigap can usually switch to Advantage. Why do you think that is? Because insurance providers make more money for less service with Advantage plans. If you were happy with an HMO, an Advantage plan may work for you, but I don’t favor them in most cases.

When to claim, and all the ins and outs surrounding claiming after a divorce are, of course, somewhat complex and decisions should be made based on your own financial situation. I’m here to help.

If the employment picture is so great, why are people unhappy?

Posted on May 15, 2019June 14, 2019 by Danielle

Don’t believe everything the President tells you. In fact, it’s a generally accepted principle that for anything he says, the opposite is true. Which is really chilling when he announces that we have the best employment and economic picture, well, since forever.
That’s not the felt experience of nearly every client (or family member, or friend) that I see. Although most people I see do have a job, I see certain factors that paint a far less rosy picture:

• Even if you have a job, you’re scared that it may evaporate. Corporate and institutional loyalty to employees is long gone. People definitely get fired at will, or on a whim.• If you’re young, you’re expendable. They can definitely find someone with your (limited) skills.
• If you’re old, you’re also expendable. They can definitely find someone younger for far less, and who cares about your experience. Your skills are probably out of date anyway.
• Ha-ha on worker protections. Do you really think this administration is going to go full throttle on discrimination claims, disability accommodations, or workers’ rights?
• You probably don’t have a union to protect you. Somehow employees were convinced that unions weren’t for “professionals” and that union dues would send them into poverty. Being on your own with no backup is certainly worth it, right? To the employer, that is.
• If you just graduated, you may feel hopeless about finding a job at all, and therefore aren’t counted as in the labor market. Congratulations if that $120K-$250K you just spent got you any services at all from your school’s Career Services office.
• The gig economy has infected even so-called full time, in demand jobs. Staffing companies have appeared like cucarachas in the so-called in-demand fields like health care and computer services. They may offer you a tiny bit better hourly rate (and it’s always hourly, not a salary), but your benefits are non-existent, they probably aren’t going to contribute to any retirement plan, your paid days off may not exist, and you’re very likely to be held to unreasonably high “productivity” standards. You’re working for Uber, whether you know it or not. So yeah, I guess you’re in demand.
• We have a miniscule social safety net nowadays. Social Security is unlikely to be anywhere near enough to cover expenses. You’re a unicorn if you still have a pension, and even if it exists you’ll have to work longer to qualify than indentured servants in the colonies did.
• Good quality childcare is so expensive that it’s not even worth it to work in some professions (you know, the helping, socially useful ones).
• Make me laugh, let’s discuss health insurance. If you leave your job, once it runs out you’re back on the exchange. And if you take a new one with group insurance, unless the employer has the same insurer, you’re probably going to have to meet a second deductible. If you do find yourself in this situation, be sure to discuss this with the new insurer—some will give you credit for having met your deductible. Despite how it looked when the Affordable Care Act went into effect, most of us are afraid to leave our jobs because of the cost of insurance. Oh well, at least we can get it now.

Except for the childcare (mom stayed home until I went to school) NOT A SINGLE ONE OF THESE POINTS was true for my parents (born in 1913 & 1915). Sure, there’s lots that was wrong in previous eras (discrimination, worker safety), but full employment under Harry Truman (I just finished David McCullough’s biography) looked a lot different than what “full employment” means today. And not in a good way.