We cover 13 Questions about Social Security
We KNOW you have questions about social security. We all do!
And we have learned you may not know the answers! On a survey shared with 55 to 65 year old folks, 69% of respondents either failed the test – or barely passed!
Since Social Security often becomes a sizable chunk of income in retirement, it’s somewhat astonishing that folks in this age group – approaching retirement — are not up-to-speed on these questions about social security.
Get with your financial planner if you struggled with these topics or questions!
Listen in for 25 minutes of putting your questions about social security to bed!
Time Stamps for “13 Questions About Social Security”
5:37 – Question 1 – taking social security early
6:45 – Question 2 – are my benefits reduced if I continue working?
9:16 – Question 3 – what about my spouse?
11:45 – Question 4 – same-sex marriage benefits?
12:15 – Question 5 – spousal death benefits?
13:38 – Question 6 – my specific social security account?
14:45 – Question 7 – what if I have young children?
15:58 – Question 8- what if I am divorced?
16:48 – Question 9 – Reduce social security by 20%?
19:06 – Question 10 – full retirement age is?
19:37 – Question 11 – what if I delay past age 70?
20:22 – Question 12 – taxes on Social Security?
22:16 – Question 13 – Citizenship and social security?
Links for “13 Questions About Social Security“
Thanks for listening to podcast episode #441. Please be sure to subscribe to the Mullooly Asset Management podcast wherever you tune in to your favorite shows.
You can also find all of our previous Mullooly Asset Management podcasts here.
Transcript for 13 questions about social security
Welcome back to the Mullooly asset management podcast. This is episode number 441. This is Tim Mullooly here with me Today is Tom Mullooly. Tom has it gone? To go and well happy to be here.
So today let’s dive right in We want to talk about social security. A hot button issue that people seem to always have. Relatively strong feelings about, and, you know tends to be a big factor for a lot of people when it comes to retirement planning and retirement income. When we’re planning for people it’s always something that we have to consider. Uh there was an article on CNBC that.
Outlined a 13 question true or false quiz on social security. And. I think what was very surprising was the group of people that they. Ask these questions to people who are getting close to actually taking social security Yeah So the age group I think. was most their knee.
Near retirees So they were ages 55 to 65 So the younger portion of that group. Can’t yet claim social security but they’re getting to the point where they’re probably thinking about retirement and retirement income and how social security might factor in…
And their numbers in terms of what they might…be able to get in social security…are going to be relatively close to where they’re going to be when they turn 62 or when they claim. Down the road. 69% of these respondents these near retirees 55 to 65 failed or barely passed by one question. Which is not great. Not great at all.
A lot of people in this age range. Expect social security is going to be a big big chunk of their retirement income Yeah. And they don’t know. Or don’t understand. How the program works now look it’s, it’s complicated We both have CFPs We know.
It’s not straightforward. No there’s a lot to discuss and a lot to think about a lot of bells and whistles and things. That could factor into claiming social security when to claim when not to claim when should I delay until do I need to take it Now? There’s a lot of stuff that goes into it, but just knowing you know the general nuts and bolts of. Of social security and some.
You know determining factors is important considering it’s going to be such a large chunk of. Uh people’s retirement plans. I mean I think, and correct me if I’m wrong but I feel like when social security was created, Eh ideally it wasn’t supposed to be the main source of income for for so many retirees It was supposed to. Supplement and help But. I mean, peop there are a lot of people out there that just live off of social security And…
I don’t know if that’s exactly what it was designed to do So social security was part of the new deal created by a FIAR president Roosevelt in 1933. The idea was that you would start collecting social security at age 65. And that was the only wrinkle Yeah. I mean now there are so many twists and turns with social security, like any government program. It just kept it simple Yeah.
It would have been a lot easier to understand Yeah. But it was supposed to start at age 65 This goes back now 90 years. Uh start at 65. In 1933 when this program began the average life expectancy in the United States of America was 66 Right. So you had a one in two chance of not getting social security at all Yeah So the odds are greatly improved that you’re going to get.
Something. Yeah. Yeah So obviously it’s turned into something much bigger and much more complex over the years as life and life expectancy has continued to. You get higher and higher. They needed to adapt along the way Cause they weren’t might not have a foreseen, you know people subsisting off of social security for multiple decades Let alone.
Five years or six years, right? So, yeah it’s there’s a lot to consider and it’s a it can be a complicated topic. Uh
still you know when I when I saw this article on CNBC, the hope is that these, these pass rates and numbers I would be a little bit better considering that social security affects pretty much everybody. Yeah, across the country. I’ll be honest I took the quiz so I had to do so I got. Hand up I got an 11 out of 13. Okay There were two questions on there that they were a little bit technical so I I’m making excuses here but they were a little technical and I, I wasn’t quite sure.
Uh true and false. So I was like, you know the answer it’s like well it kind of depends on certain factors Like are they talking about this or that to. But anyway so I’ve taken the quiz Also say that. Some of the way these questions are worded. Are vague on purpose their tests their test questions Yeah.
And and so I’ve found myself saying well the first half of that question is true but the second half of the question is false but. Let’s just get into it. Yeah Number one in most cases. If I take benefits before my full retirement age. There’ll be reduced for early filing, true or false.
That is a true statement. Uh
and they said 84% answered correctly which is a good thing because I feel like that’s one of the basics you know everyone has their full retirement age. Whether it’s you know for most people now it’s 67. There’s still some people where it’s like 66 and eight months or whatever, but you know if you if you collect before full retirement age, What you get per month and per year will be less than if you were to wait until full retirement age I feel like most people out there should know that a an 84% of the people they surveyed knew that which is which is a good thing Just an observation. I’ve noticed that like jeopardy. The questions at the top or a little easier And if we went further further down when you get to the $2,000 question…
This is a little complicated. Get down to the nitty-gritty So 84% seven out of eight people got that one Right So number two if I’m receiving benefit before my full retirement age and I continue to work. My benefits might be reduced based on how much I make. True or false. So that is also true.
And 77% percent of people got that Correct. Again a good thing. And it makes sense You. If you’re if you’re taking benefits before full retirement age, like it says in the beginning of the statement, the question we just answered. Said that.
That is true You would get a reduced amount. And if you continue to work I think that’s that’s the kicker here with the second question is if you continue to work and you’re collecting social security, There’s an extremely low threshold for what you can make at your job to not have a reduced amount. I don’t have the specific numbers off the top of my head but once you get to a certain point…
I want to say it’s like $50,000 a year If you make more than that. What you get in social security is reduced. Ella for a dollar for dollar it’s like every $3 is a dollar off of social security So. Uh yeah. If you continue to work and you’re.
social security and your before full retirement age. Based on how much you make you’re going to have reduced social security benefits. And I think this kind of bridges into…discussions that we have with people that social security about. When to claim and if you’re working there, When we go through plants with people there might not, in most cases there’s probably not going to be a need to start claiming. While you’re still working and making income.
Obviously there’s going to be extenuating circumstances for some people where they are are are already claiming and, and then continue to work for whatever reason But most people if you’re if you’re working and you’re before before…full retirement age…
I’m going to guess that there’s probably not a reason to claim social security and you’re better off delaying because then you’ll end up with a higher amount. So when you do claim. Just a question. What if I’m retired and collecting a pension? Will that.
Count towards offsetting social security. No that that wouldn’t factor in. So it’s that’s a retirement income pension income It’s not earned income from a salary or from wages from a job That’s right That’s a big difference between earned income and retirement income Yeah All right Let’s let’s move on to number three. If I have a spouse. He or she can receive benefits from my record.
Even if he or she has no individual earnings history. True or false. That is true as well Uh, three true answers in a row. Again so say they said 72% of people got that one Correct? Uh you know we’ve seen this with folks that come in, part of the discussion about social security is figuring out.
You know if you’re married how did how to file and best…
optimize the social security strategy with husband wife who claims for. whose benefit is bigger. There’s usually some scenario where one spouse files a little earlier and the other one continues to delay And then eventually you’re both collecting social security and it’s based on whoever’s. Benefits are bigger. In this case even if the spouse has no individual earnings history you can claim.
Uh against your other spouse. So yeah there’s there’s different strategies that come into play when you’re figuring out which spouse claims first, who delays who doesn’t delay. All that stuff. Little social security tidbit that comes along with that. Your social security income.
Your check. It’s based on…the highest 35. Earning years. Some people think it’s based on age. Some people think it’s based on the last year.
of your work career. It’s based on the highest 35 years of your work experience So I had years where I started the business I went from. You know earning a lot of money in commissions when I was at Morgan Stanley and then I went to zero. So I had a couple of years in the middle of my career where there was I honestly had no income to show. So it’s based on the 35.
Highest earning years Yeah. Yeah I think some people might get confused with that because. For a lot of people your highest earning years might also coincide with the last couple of years before retirement. But they might not. They might not So they there could be a scenario where you know you start winding down for a few years before you start collecting social security and those, those may or may not factor in.
Number four here. Generally if I’m in a same-sex marriage there are different eligibility requirements when it comes to social security retirement benefits, that is false. Uh
most people got that one Correct too. Oh three. Truths in a row So I knew a false was coming Yeah. Also just logically thinking there Uh, there’s no way that they would set up rules like that I know they just wouldn’t do it that way. So.
Uh that was a pretty easy question. Number five. If I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse’s full benefit. False. This is false and only 65% of people got this Correct.
And I don’t blame them because spousal benefits for. Deceased. Benefits for a deceased person. The spouse. Sometimes it can be a little confusing and it’s worth looking up.
Um we we had a scenario last week, in fact where this exact. situation. Came up and it was worth clarifying that. You know you can claim spousal benefits. From.
Uh your deceased spouse up until the point that you claim your own benefit, or you can continue to claim those spousal benefits in perpetuity If that number is higher than your own benefit so you can choose. Which one you want to claim the higher of the two. And then you’re there. You will automatically get whichever one is higher right. So you’re either going to get the spousal benefit Yeah.
Or your own benefit. Whichever one’s higher. That’s what’s going to happen Right And a lot of people just don’t understand it You’re not going to get both Yeah. But yeah your. You are entitled to it Yep.
Okay next one. The money that comes out of my paycheck for social security goes into a specific account for me. And it stays there earning interest. Until I begin. to receive social security benefits True True or false.
That is false. There’s a few…
Items in that statement that make it false. Yeah your money. Does go into some sort of massive account. Pool. But it’s not specific for you, right So your money gets put together with every other person paying into social security…
It’s like when it’s like at a bank account if you put money into a bank, Your, your physical dollars are not sitting in a marked case specifically for you waiting to be pulled out, Tim. That’s in the vault. Right My. Exactly There’s no, Tim Mullooly vault at social security There is just the big pool of social security money And when you claim social security in retirement they start paying you out from the big pool of everybody’s money. Yeah.
All right Well number seven is. I file for retirement benefits and have dependent children aged 18 or younger, they may also qualify. For social security benefits. So this is a question that I got incorrect. The answer is true.
So I thought it was false. Because I was struggling to think of a scenario where someone is retirement age. That that has. Young children under 18 as dependence at that could be. That could qualify for social security.
But I think it would have been easier to answer this as true if they also included disability, socials social security, because I feel like that’s the more frequent scenario where this is applicable. Well Charlie Chaplin did have a kid in his eighties. Right I know that it, and I’m not saying that that that doesn’t exist but I was just thinking frequently there’s there’s not too many situations where that occurs. But but yes. For most people that fall into this category it’s going to be disability social security, not just regular full retirement age social security Yeah.
Alright next question is a question that we get asked a lot. If I get divorced. I might be able to collect social security benefits based on my ex spouse’s social security earnings history, true or false. That is true. And I think the most important word in that.
Question is, might. You might be able to collect social security based on your spouse’s earning history. Conditions there are conditions based on how long you were married. If you decided to remarry. Um
if you’re claiming based on someone else it’s so there are there are a couple of different factors that could disqualify you from this but you might be able to so. technically the answer is true. So question number nine we both whiffed on this one because and I have a problem with it because I think that the wording is. Misleading. So.
Under current law. I’ll say that again. Under current law. Social security benefits could be reduced by 20% or more for everyone. By 2035.
True or false. I said false but the answer is true. Apparently. So…I think it should be better. Written as under.
Proposed. Right law, right. Yeah I. That that’s where I got tripped up as well. And again I think people might read this question and be like what.
My my social security is going to be reduced by 20. or more by 2035. And it’s like no no no no no Wait. Like I said but the last question too there’s one word in there that is very important. Last question It was Mike.
This one is, could. It also means it could not write. We don’t know what’s going to happen in 2035. If you saw the headlines from March of 2023 where…
Paris. And much of France was basically. Set on fire. That’s what happened when they tried to Ram through some proposed legislation. To cut retirement benefits.
People went out of their minds…
You can also fully retire and collect full benefits at, I forget if it’s 60 or 62 in France but it’s a. It’s very different Yeah. Then than it is here Yeah And you know it’s. the question said could we’re in 2023 this is by 20 20, 35. So plenty of things can change along the way By the time we get to 2035, the laws or proposed laws laws could change two or three times by then.
So when I heard that social security will be out of money by 1998, right? Yeah. Exactly. 24 years ago Yeah Point made. Yeah.
All right let’s go to question 10. Under current social security law full retirement age is 65 No matter when you were born wrong We covered that earlier So full retirement age for most people now is 67. It started at 65 like you said like you said before, there are some people out there that are kind of in the middle where they’re 66 in a couple months or 66 and eight months nine months. For most people now at 67. Well all right let’s get to the last three questions here Question 11.
If I delay taking social six. benefits past the age of 70, I will continue to get delayed retirement credit. Increases each year I wait. That is false. That’s false And I think the most surprising thing for me is that 49% of people got that Right.
Which means that 51% of people got that wrong…
That’s that’s. I mean the questions have gotten a little bit trickier as we’ve gone along here but that’s should be. Social security 1 0 1. That’s basic stuff that compounding stops at 70. There is no benefit to delaying to 71 or 72 Take it right The money Yeah.
Okay. Question number 12, social security retirement benefits are subject to income tax, just like withdrawals from a traditional IRA account. Okay. So this. Statement as it’s written is false but this is where if you’re a good test taker.
You will be able to snip out that this is kind of tricky. Yeah In the way that they worded this because the first half of the question is true Right. But the second half of the question is, is false Can you just read the question again? Sure Social security retirement benefits are subject to income tax pause. That is very true Yes.
Just like withdrawals from a traditional IRA account that is false Right. So social security benefits are taxable. In some capacity but they’re not taxed the same as earned income. Right Which ordinary income which is what. Traditional IRA distributions are tax at right So dollar one comes out of an IRA or 401k.
Every dollar that comes out is going to be taxed as if you earned a salary it’s ordinary income Right All right However, with social security. If you earn more if you are more income than a certain threshold. 85% of that income is going to be considered taxable It’s not an 85% tax Right…
It. And actually he said that back to me I was like no no no So 85% of the income will be considered taxable income and it gets applied to your bracket And you know we go from there. Yep. So a little tricky Yup. I got to read the question carefully right?
We know from taking tests like that Yep. All right So last question. I must be a us citizen…to collect. Social security retirement benefits, true or false Tim. That is false.
Only 29% of people got that Correct…
There are techniques There are technically ways for people that are not us citizens to collect. Social security. It doesn’t say that you are. your own social security, retirement benefits. You could be collecting.
Uh spouses. Retirement benefits. I feel like that is one way that a non us citizen could collect on social security. Well what about a person who worked their entire career And then they retired to. Billy’s.
Right. Yeah Or they they’re lighting cars on fire and Paris Right, right. So they work there were us citizens they’re entitled They’re entitled to collect their social security benefits Yep. Yeah It’s another. Question where it’s worded.
Specifically in a way to make it. Seam…
Like the opposite answer is true but it is false. So…
So there was a lot that we just threw at you for social security obviously as you can see there’s a lot of stuff that goes into…
The decision of when to claim, how to claim. What the benefits are of delaying or claiming early. Yeah And that’s one of the things that we help people a lot with when we’re working through retirement plans it’s figuring out the best plan for social security. So we didn’t need we did not even touch on how Medicare factors in with social security. We’re going to have to do a separate episode just for that Yeah.
Yeah There’s a lot that goes into it And like I said in the beginning of the podcast people tend to have feelings about social security one way or another. So ultimately it’s our job to provide you with the best information possible and all the different options and explain everything in clear terms so that you know what you’re working with. And then we can have a discussion about what the plan requires. You know what you need to do. In terms of claiming or delaying and how how it all feels to you.
Ultimately. it’s up to the individual to make that decision. But, but this becomes a big factor in putting together cashflow projections for our clients Yeah absolutely It’s a it’s a big source of income for a lot of people in retirement So it’s important to make an informed decision when you’re doing something like social security. But that’s going to wrap up episode 4 41. Thanks for hanging in there with us We know it was a longer episode but uh
happy to go over all this stuff. We’ll see you on the next episode…