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Debunking 3 Big Myths About Social Security

Let's face it, Social Security can be confusing.
Image: Retirement
In the era of low interest rates, the old 4% rule for withdrawing retirement funds may not apply to most retirees.
/ Source: CNBC.com
By Sharon Epperson, CNBC and Katie Young, CNBC

Let's face it, Social Security can be confusing.

Trying to determine when to collect. Calculating how much you'll get if you claim early or wait. And figuring out the ins and outs of spousal benefits.

When it comes to Social Security, what you don't know can definitely cost you. The decisions you make on when to file could potentially result in tens of thousands of extra dollars in your pocket during those golden years.

Yet a recent survey by insurance company Mass Mutual found its respondents were mostly clueless about the system. Only 28 percent received a passing grade after answering a series of true or false questions about this key source of income for many retirees.

In addition, just 8 percent considered themselves knowledgeable when asked about their comfort level with the program.

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To make sure you get the most out of every check, here's the truth about three common Social Security myths.

1. The retirement age is 65.

That may have been the case for many years, but it's not true anymore.

If you want to get your full Social Security benefit, you need to wait until what's called "full retirement age" to begin collecting. The full retirement age is actually increasing and may be 66 to 67 depending on when you were born. If you were born in 1960 or later, it's 67.

To figure out your full retirement age, go to the Social Security Administration's website and use the retirement age calculator.

2. You can work and collect full benefits regardless of age.

If you haven't reached your full retirement age and you are working while collecting Social Security your benefits will be temporarily reduced. The Social Security Administration will use what it calls a "retirement earnings test" to make the adjustment.

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So if your income exceeds $15,720 for the year, $1 will be taken out of your Social Security check for every $2 you earn above that limit.

3. You can't collect if you've never worked.

You can still receive a spousal benefit even if you never paid into SocialSecurity. In fact, those benefits can equal up to one-half of the spouse's full retirement benefit.

And that's the truth about Social Security.

Sharon Epperson, CNBC

As CNBC's personal finance correspondent and senior commodities correspondent, Sharon Epperson reports on personal finance for the network and also covers the global energy, metals and commodities markets from the floor of the New York Mercantile Exchange.

In addition to reporting for CNBC and CNBC.com, Epperson is a regular contributor on NBC's Today and Today.comand appears frequently on NBC Nightly News, MSNBC and NBC affiliates nationwide. She also frequently reports for Public Television's "Nightly Business Report," which is now produced by CNBC.

Her book, "The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After," was a finalist for the Books for a Better Life Awards, honoring works that have "changed the lives of millions." She also was a contributing writer for "The Experts' Guide to Doing Things Faster."

Epperson's personal finance expertise has been featured in numerous publications, including USA Weekend, The Wall Street Journal, The Washington Post, The Boston Globe, Self, Essence, Ebony and Time, where she had covered business, culture, social issues and health as a correspondent prior to joining CNBC. 

She is committed to improving financial literacy, particularly in underserved communities. She has been invited to the White House to speak about financial literacy and to moderate a public meeting of the President's Advisory Council on Financial Capability at the U.S. Treasury Department. She also speaks frequently at conferences and events for local and national organizations, colleges and universities about many facets of personal finance.

Epperson has received the Vanguard Award for her distinguished career in business and personal finance reporting from the National Urban League Guild, the All-Star Award from the Association of Women in Communications and the Gracie Allen Award from the American Women in Radio and Television for a series of reports on female CEOs. She also has won awards from the New York Festivals, the New York Association of Black Journalists and the National Association of Black Journalists.

An adjunct professor at Columbia University's School of International Public Affairs for more than a decade, Epperson enjoys teaching the importance of budgeting and building long-term savings as part of her course on professional development for graduate students interested in media careers.

Epperson received her bachelor's in sociology and government from Harvard University, and a master's of international affairs degree from Columbia University. A Pittsburgh native, Epperson lives with her husband and two children in Westchester County, N.Y.

Katie Young, CNBC

Katie Young is a producer for CNBC.