Americans are Woefully Ignorant About Social Security

Social Security is one of the most recognizable names around. And it should be. After all, it began in 1935. So, you’d think after 87 years Americans would have a really good understanding of what Social Security is and how it works. The 2022 Social Security Survey conducted by the Nationwide Retirement Institute found that’s not the case. Approximately two-thirds of Americans don’t understand key provisions and basic concepts of Social Security. For example:


Number 1

62% of people surveyed didn’t know that your Social Security benefit will be reduced if you work less than 35 years.

You don’t need to work 35 years to receive Social Security, but you do need to work that long to get the maximum benefit based on your work history. Benefits are based on your highest 35 years of earnings. If you work less than 35 years, a zero is recorded for each year without earnings, which lowers your benefit amount.


Number 2

65% of people don’t know that if you claim your Social Security benefit before your Full Retirement Age (FRA) any spousal benefits your partner is eligible for will also be reduced unless your spouse waits until their FRA to claim those benefits.


Number 3

66% of Americans think you have to be enrolled in Social Security before you can sign up for Medicare. That’s wrong and can be very costly. Medicare enrollment takes place when you’re 65 whether you are receiving Social Security or not. In most instances, if you don’t sign up for Medicare when you turn 65 and then enroll later, you’ll be assessed late enrollment penalties that will last for as long as you’re on Medicare.


Number 4

68% of people surveyed are not aware that you can cancel your Social Security benefits within 12 months of the time you applied if you change your mind. You’re allowed to withdraw your application once during your lifetime. You’re required to pay back any benefits you’ve received. Then you can re-apply in the future when you will receive a large Social Security check.


Number 5

68% think Social Security has no inflation protection. But it does. Social Security recipients are given an annual Cost of Living Adjustment (COLA) in an attempt to stay even with inflation. The annual increases are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The 2022 COLA was 5.9%, the largest increase in 40 years. The COLA for 2023 is estimated at this writing to be between 9-11%.


Number 6

73% of Americans believe they pay Social Security taxes on all of their income. That’s true, unless your income is above the annual income cap, also referred to as the contribution and base benefit amount, which goes up almost every year. In 2022, the cap is $147,000. Anything above that amount is exempt from Social Security payroll taxes.


Number 7

86% of people have no idea that you can claim Social Security benefits on an ex-spouse’s work history if that amount is more than you would receive based on your own work record. To qualify:

  • Your marriage had to last 10 years or longer
  • You have not remarried
  • You are at least 62 years old
  • Your spouse is entitled to Social Security retirement or disability benefits


There’s lots to know about Social Security, and since it’s a major source of income for many retirees, it’s worth your time to learn what’s available and how it works.


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