There’s a ton of misnomers on this subject. Some people have become experts on the workings of the Social Security Payments System. I would like to dispel some popular rumors out there, especially for all you non-financial types on the subject of Social Security payments.

Aside from some of you having personal situations of “worker disability” [defined], or even dependents with “disability” what I’m about to write here is the more basic or common workings and under-workings of Social Security. I’m no “expert” on the subject but that’s not required in order to get a good grasp of the truth regarding what’s promised and not promised to those who meet the criteria to one day receive payments from the Social Security Administration. Let’s say you paid into the system and are now eligible to receive income back from Social Security once you [and your employer(s) on your behalf] accrued/payed 10 continuous years of four quarters of Social Security Taxes. In other words “eligibility” is defined as accruing 40 quarters of paying into the system for every worker.

Social Security taxes have never been segregated from the federal government’s general tax revenue fund. This is the same tax revenue fund that Congress is in charge of doling out. It’s been this way since the inception of Social Security taxes being collected in this country. [So let’s stop talking about how this or that lawmaker is invading the Social Security Fund when there was never a federal fund set aside for Social Security in the first place.] We can debate on whether or not that was a mistake at another time…

Here’s what I hear a lot – “I’m going to wait and not take Social Security until my maximum age [obtaining the age of 70] to turn it on because it will grow by close to 8% per year as long as I defer it.” This is total bullshit! Social Security Administration is not paying you an 8% return every year on your money – I’m LMAO! What they’re doing is looking at your estimated mortality, [or when you’re most likely to die]. It’s an actuarial decision, and has zero to do with investment returns. That’s what they’re doing, running the numbers for paying you “x” dollars beginning at age 60-whatever vs. paying you “x+” dollars if you decide to wait until 4-8 years later, it’s the same amount of money squeezed into a shorter period of time. What does it matter if I paid you “x” dollars for 20 years of your remaining life, or I decided to pay you “x+” dollars over a shorter period of time? Nothing, nada, there’s no difference at all.

Want to roll the dice on deferment? Because your offspring won’t recover any of your payments once you die. Your spouse or ex-spouse could get one-half of your monthly payments, but that’s only if its below what they have earned on their own [through the System]. In other words, you die and you leave behind whatever would have been paid to you anyway. Still want to wait until you have to turn payments on by law? When all they did was sit on your own money. [Not one of us knows when exactly we will leave this Earth.]

Here’s another one I hear about as often – “I’m turning on my Social Security payments early, yea I need the money”. Because you need the money? Let me get this straight, you’re only 62 and barely eligible for any payments and you aren’t going to wait until your full eligibility age because there’s [pick a number, always small] $1650.00 a month for me as long as I turn it on right now.” Gee, so once you get $1650/month you can leave a paying job and retire early? Okay, you found almost $20,000/year, now what else are you planning to live on? Let me tell you what happens to most of these people, they begin receiving Social Security payments early and then suddenly realize that they really needed a job all along because early Social Security payments aren’t going to meet their monthly nut. So what happens next? They take a job doing something to supplement their Social Security income, then what happens? It’s a gotcha! FYI, the Social Security Administration is attached to the IRS at the hip, and they monitor all income from early recipients because there’s a law out there that states the Social Security Administration can claw back income they paid you should your total income exceed a certain amount in any one year [for as long as you’ve not reached your full Social Security retirement age]. And the amount that you’re allowed to earn over early Social Security payments is quite small, it’s less than $20,000 annually. Ut-oh, and now you owe back some dough that you received before you reached your full Social Security eligibility age, a really terrible situation because that money has most likely evaporated. Never do this, always wait until you reach your full Social Security eligibility age before receiving payments. If that means you’re working until that time and even after that time, so be it. Look at it this way, at least what you receive back from Social Security you can keep. Furthermore, they don’t care how much other income you earn after you’ve turned on Social Security payments at your full eligibility age. Noting here that they will tax your payments if your income exceeds I think it’s $35k per year at this writing. Isn’t that nice? So we paid into the system with a tax for seems like eons and now they’re going to tax those payments coming back out. [Something could be wrong with this picture.]

Also understand that if you’re in the camp of deferring payments to age 70, you are no smarter for deferring your Social Security payments than those of us who do not defer. I get some of your arguments, “I just don’t need the money right now”, I get that, just understand that none of us knows when our last day on Earth will be. And wherever you land next, those unspent funds aren’t coming to you via a Zelle transfer to your address in Heaven… 😉