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Don’t Misunderstand These Social Security Facts

Filed under: Social Security Planning

At first glance, Social Security may seem like a fairly simple tool. You retire, file for Social Security and start receiving benefits. Seems easy enough, right?

The truth is that Social Security can be complex. Your benefit amount is based on a variety of factors, including your work history, earnings history and the age at which you file for benefits. Your spouse’s age and earnings history can also impact your payment. Finally, it’s also possible that your benefit could be taxed, potentially reducing your net income.

Is retirement fast approaching? If so, you may be in the final stages of planning your retirement income and developing a budget. Social Security is likely to play a large role in those plans. Nearly 90 percent of those age 65 or older rely on Social Security income to fund their lifestyle.1

Unfortunately, many retirees don’t fully understand all the complexities involved in Social Security. As a result, they fail to plan and don’t maximize their potential benefits. You can avoid those mistakes by educating yourself and considering your own needs and goals. Below are a couple of facts about Social Security that are commonly misunderstood by retirees:


You can file for benefits based on your spouse’s income.

One common misconception is that if you have limited work history or a track record of low earnings, you are doomed to a minimal Social Security benefit. That thinking is understandable. After all, your work and earnings histories are two of the biggest factors in determining your benefit amount.

This may seem like bad news for spouses who put their career on hold to raise children or to support the other spouse’s work. However, Social Security allows you to claim a benefit based on your higher-earning spouse’s work history rather than your own. So even if you have a limited earnings history, you could actually get a higher benefit because of your spouse’s high earnings.

Even if you’re divorced, you can still file for a spousal benefit. Divorced individuals can file for a spousal benefit if they are age 62 or older, the marriage lasted at least 10 years, they have not remarried, the ex-spouse is eligible for Social Security and if the spousal benefit would be greater than their own.2


Your benefits may be taxable.

If you retire and stop earning income, surely your income taxes should end too, right? Not quite. You will likely have taxable income in retirement. Common sources of taxable income include pension benefits, investment earnings and, yes, even Social Security.

Up to 85 percent of your Social Security benefits may be taxable depending on your “combined income.” The IRS defines combined income as the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit. The greater that number is, the higher the percentage of your Social Security payment that is taxable.3

A failure to plan for taxes could lead to a serious financial challenge in retirement. You may have less income at your disposal, and you may find it difficult to support your desired lifestyle. Take some time to estimate your taxes and plan accordingly.

Not sure you fully understand your Social Security options? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you examine your options and decide on the best path for you. Let’s connect today and start the conversation.







This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit

16241 – 2016/11/15