A funny thing happens when many FERS pre-retirees start planning their retirement. Social Security isn’t considered as important as their FERS annuity and TSP. Add to this, there are a number of myths about Social Security that can weaken your retirement plan.
FICTION: Social Security Benefits Are Not Taxable.
It’s really amazing that this misinformation persists when you consider Social Security benefits became taxable in 1983 under the President Reagan Administration. Yet, forty years later some federal retirees are shocked to find Uncle Sam wants a cut of their Social Security benefit.
FACT: Up To 85% Of Your Social Security Benefit Is Taxable As Income
For example, in 2022, a portion of your Social Security income is taxable:
If you file a federal tax return as an “individual” and your “combined income” exceeds $25,000.
- If you file a joint return, you must pay taxes if you and your spouse have “combined income” of more than $32,000.
FICTION: You Never Get Back All The Money You Put Into Social Security
This misinformation persists because people are concerned about the ever-rising cost-of-living. Add to this, news articles about Social Security COLAs failing to keep up with inflation give Social Security a bad reputation.
“Consider this – each year, the number of Americans reaching their 100th birthday increases. If you’re among them, you’ll get back far more than what you put in.”
FACT: If You Live Long Enough You May Get Back More Than You Put In
Let’s say your Social Security benefit is around $2,000 a month at your full retirement age (FRA). Calculating an average life expectancy, you can receive well over a half-million in benefits if you live long enough. If your spouse receives a benefit based on your work record, the total can easily double depending on your longevity as a couple. Consider this – each year, the number of Americans reaching their 100th birthday increases. If you’re among them, you’ll get back far more than what you put in.
FICTION: There’s No Such Thing As A Social Security Retirement Strategy
Believing this misinformation can end up lowering the amount of your Social Security benefit for the rest of your life. Combined with the idea that filing early at age 62 doesn’t make much of a difference, far too many federal retirees have left money on the table when it comes to their Social Security benefits.
FACT: You Can Coordinate All Of Your Benefits To Boost Your Income
Coordinating your FERS annuity and TSP withdrawals with your Social Security can help boost your retirement income. Connect with an FRC® Trained Advisor who understands your benefits to find out how.
