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Ten most common misconceptions about Social Security
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If I had the space, I probably could write a column called "The One Thousand Most Common Misconceptions About Social Security." I see examples of them almost every day in the emails I get from my readers. Alas, I'll barely have room to cover the top ten. This week, I'll stick to the program side of Social Security. Next week, I'll go over some of the most common policy and political misunderstandings.

Misconception One: Social Security retirement benefits are based on your last 10 years of earnings. Other misunderstandings say benefits are based on a "high five" or a "last three" base of earnings. None are true. All retirement benefits are based on a person's highest 35 years of earnings — with each year being adjusted for inflation.

Misconception Two: If you work after you start getting Social Security, the extra taxes you pay will automatically increase your Social Security check. You will only get such an automatic increase if your current income is higher than the lowest of the 35 inflation-adjusted years of earnings used in your original computation.

Misconception Three: You can take reduced benefits at 62 and later switch to full benefits on your own or a spouse's record. With very few exceptions (the major one applying to widows), you simply can't do that. If you apply for any kind of Social Security benefit before age 66, you must file for all other benefits you are due at the same time. But those rules change dramatically if you wait until age 66 to file. To understand these rules, send me an email and ask for a free digital copy of my fact sheet, "When to Take Your Social Security Benefits."

Misconception Four: Working women are cheated because they cannot get their own retirement benefit and a wife's or widow's benefit from their husband's account. I get emails almost every day from women complaining about this issue. Interestingly, I've never once heard from a working man complaining that he can't get a husband or widower's benefit from his wife's Social Security record. Simply put: As a general rule, if you are due two benefits (and any married person who works is potentially due benefits from his or her own record and from a spouse's account), you only get the benefit that pays the higher rate. To clarify further, you should understand that spousal benefits are only due to financially dependent wives or husbands.

Misconception Five: You must be married for at least 10 years to qualify for spousal benefits from Social Security. That 10-year duration of marriage rule applies only to divorced spouses.

Misconception Six: Any benefits paid to a divorced spouse offset payments due to a current spouse. That is simply wrong. Social Security checks paid to an ex-spouse have no impact on benefits payable to a current spouse. They each can receive whatever spousal benefits they are due.

Misconception Seven: Teachers are cheated out of Social Security benefits on a spouse's record. This fallacy grows out of a misunderstanding of a law called the "government pension offset." That law simply says that teacher's pensions (received by teachers in jobs not covered by Social Security) will be treated like a Social Security retirement benefit. Social Security retirement benefits have always offset any spousal benefits a person might be due. The GPO law simply says that teacher's retirement pensions will also offset any spousal benefits due. To understand this better, send me an email and ask for a free digital copy of my fact sheet, "Pension Offsets and Social Security."

Misconception Eight: Social Security disability benefits are welfare. Where does this idea come from? (Actually, I think I know, and it's explained in the next paragraph.) Let's look at two people. Joe has worked and paid Social Security taxes all his life. He retires at age 62 and gets Social Security retirement benefits. Jack has also worked and paid Social Security taxes all his life. Unfortunately, he comes down with prostate cancer at age 58 and starts getting Social Security disability benefits. Why do so many people think Joe is getting a benefit he earned while Jack is getting some form of welfare? They are both getting Social Security benefits for which they have worked and paid taxes.

Misconception Nine: SSI is some kind of Social Security benefit. Supplemental Security Income is a federal welfare program that has nothing at all to do with Social Security other than the fact that it is managed by the Social Security Administration. SSI benefits are funded by general tax revenues, not by Social Security taxes. SSI pays a very small monthly stipend to poor people who are over age 65 or who are under 65 but disabled. Unfortunately, many people confuse SSI disability payments with Social Security disability benefits. They are two distinct programs. The former is a welfare payment. The latter is an earned benefit.

Misconception Ten: Medicaid is part of the Medicare program. Just like SSI and Social Security, Medicaid and Medicare are two separate government programs. Simply put, Medicaid is welfare and Medicare is not. To qualify for Part A, or hospital coverage, under Medicare, you generally must work and pay Medicare taxes for at least 10 years. And anyone over 65 or getting Social Security disability benefits can buy Part B Medicare coverage. Part B pays for doctor's visits, lab tests, outpatient hospital services and other medical costs. You qualify for Medicaid, which is as comprehensive as both parts of Medicare, not because you've worked and paid taxes, but only because you are poor.