EAST LIVERPOOL, Ohio – When it comes to Social Security, a lack of basic knowledge can put you at a disadvantage.
Every day I talk with people who take Social Security for granted. What they don’t know can make a difference in time and money and in their future.
Five mistakes. Here’s my list of the five biggest mistakes people make when it comes to thinking about one of their most important financial lifelines – Social Security.
* Thinking that Social Security can do it all: Social Security never was meant to be your only source of retirement income. It always was meant to be part of a “three-legged financial stool,” along with private pensions and savings or investments.
Most financial planners tell people to figure out how much money they’ll need in retirement, usually 70 percent to 80 percent of their pre-retirement incomes, and then start socking away 10 percent of their incomes to meet this goal.
If you can’t do that much, at least set aside one dollar for retirement savings for every dollar of Social Security taxes you pay.
Only 40 percent. Remember, for the average wage earner, Social Security will replace only about 40 percent of what you make before you retire.
* Giving your Social Security number to others: You may not realize the potential problems that can come about from letting the wrong person get hold of your Social Security number.
Most of the time letting a business or organization know your Social Security number seems harmless enough, but do you know what they will do with it? Or to whom they will pass it along?
One of the key elements needed to steal your identity is your Social Security number. It’s also a good idea to keep your Social Security card in a safe place, and to be careful in who you give your number to.
Fraud hotline. If your Social Security card is stolen or your number is being misused, contact Social Security’s Fraud Hotline at 1-800-269-0271.
* Thinking your Social Security taxes are building up a personal retirement account: Some people think that because they have a Social Security number and they pay Social Security taxes, there’s a special account that has all the money they’ve paid into Social Security, plus interest. That just isn’t so.
Social Security is basically a pay-as-you-go system. The benefits people get today are being paid from the taxes of today’s workers. Because it’s a “social” insurance program, Social Security makes sure that there’s money to help everyone.
You may get back more or less than you paid in, depending on how much you earned and how long you live. But the money you are paying to Social Security today in taxes is not going into an account for you.
* Throwing away your Social Security statement: If you’re 25 or older and you work, you receive a Social Security Statement in the mail each year about three months before your birthday. One of the biggest mistakes you could make is to throw it out without looking at it.
Key information. The statement has a lot of useful information and if you don’t already have a plan for where your money will be coming from after you stop working, Social Security should be the first place you look.
The statement shows how much you paid into Social Security through the years and what you can expect to get back at various retirement ages.
It also shows how much you’ll get if you become disabled and can’t work for a year or more. And it shows what your family will be eligible for if you die before retirement.
We recommend that you keep a copy of the statement with your financial records. If you decide not to keep your statement make sure you destroy it before discarding.
Go online. Those who take their statement seriously even visit Social Security’s Web site, www.ssa.gov/planners, to plug in various financial scenarios to find out how different wages will affect their future benefits.
* Not having your Social Security checks direct deposited into your bank: Here’s a no-brainer. If you’re looking for the safest, most convenient way to get your benefit payments, direct deposit is the answer.
Your money goes directly into your bank account and it’s there on your check payment date. There’s no staying at home waiting for the mail. There’s no worrying about your check being lost or stolen.
Your money is in your account, even if you can’t get to the bank. It’s there on your check payment date.
Are you making any of these mistakes? If so, it might be time to update your ideas about Social Security. Visit www.ssa.gov to get the latest information on just about any aspect of Social Security.
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