Navigating Social Security as you approach or enter retirement can feel overwhelming. Many common beliefs about this vital program simply are not true. Misinformation can lead you to make poor decisions, potentially costing you thousands of dollars in benefits or creating unexpected tax burdens.

As your trusted neighbor in retirement planning, we want to set the record straight. Understanding the facts helps you maximize your benefits and plan effectively. This article debunks the most prevalent Social Security myths, offering clear, actionable insights to help you secure your financial future.

Myth 1: Social Security Will Run Out Completely

This is perhaps the most widespread and anxiety-inducing misconception. Many people worry that Social Security will not exist by the time they retire, leaving them with no benefits at all. This fear often drives hasty claiming decisions.

The reality is more nuanced. Social Security does face financial challenges, primarily due to demographic shifts like longer life expectancies and lower birth rates. However, the program draws funding from current workers’ payroll taxes. As long as people work and pay Social Security taxes, the program will continue to pay benefits.

According to the 2024 Trustees’ Report, Social Security can pay 100% of promised benefits until approximately 2033. At that point, if Congress takes no action, the program could still pay about 83% of scheduled benefits from ongoing tax revenues. This means a significant reduction, but not a complete disappearance of benefits.

You can expect to receive a substantial portion of your benefits, even if reforms are not enacted immediately. Congress has options to shore up the program, including adjusting the payroll tax rate, modifying the full retirement age, or changing the benefit formula. These are political decisions, but the underlying structure ensures a continuous funding stream.

Do not let this myth scare you into making premature claiming decisions. Focus on understanding the current rules and planning for your overall financial well-being.

Myth 2: Claiming at 62 is Always the Best Choice

Many individuals believe claiming Social Security benefits at the earliest possible age, 62, is the smartest move. They might want the money sooner, fear the program will run out, or simply prefer immediate gratification. This choice often leads to significantly reduced lifetime benefits.

Claiming at age 62 permanently reduces your monthly benefit amount. Your Full Retirement Age, or FRA, is when you qualify for 100% of your primary insurance amount. For most people retiring today, FRA is between 66 and 67. Claiming at 62 reduces your benefit by 25% to 30% compared to your FRA benefit.

Consider this example: if your FRA benefit is $2,000 per month and your FRA is 67, claiming at 62 reduces your monthly payment to approximately $1,400. That is a $600 difference every single month for the rest of your life.

Conversely, delaying benefits past your FRA increases your monthly payment. For each year you delay, up to age 70, your benefit grows by 8%. This is known as “delayed retirement credits.” Delaying from age 67 to 70 would increase your $2,000 FRA benefit to $2,480 per month, an increase of 24%.

When deciding your claiming age, evaluate your:

• Health and life expectancy: If you expect to live a long life, delaying benefits often provides more total lifetime income.
• Other income sources: Do you have sufficient savings or other retirement income to bridge the gap if you delay?
• Spousal benefits: Your claiming decision can impact your spouse’s potential survivor benefits.

There is no one-size-fits-all answer. For a personalized estimate, check your Social Security statement online at the Social Security Administration website.

Myth 3: Your Social Security Benefits Are Tax-Free

Many retirees are surprised to learn that a portion of their Social Security benefits can be subject to federal income tax. This often comes as an unwelcome shock when they file their tax returns. The taxability of your benefits depends on your “combined income.”

Your combined income is calculated by adding your adjusted gross income, any tax-exempt interest (like from municipal bonds), and one-half of your Social Security benefits. The IRS sets income thresholds that determine how much of your benefits are taxable.

For 2024, the thresholds are:

• If your combined income is between $25,000 and $34,000 for an individual ($32,000 and $44,000 for a married couple filing jointly): Up to 50% of your benefits may be taxable.
• If your combined income is above $34,000 for an individual ($44,000 for a married couple filing jointly): Up to 85% of your benefits may be taxable.

If your combined income falls below the lower threshold, your benefits are not taxed. These income thresholds are not adjusted for inflation, meaning more retirees find their benefits taxable over time.

A few states also tax Social Security benefits, though most do not. Currently, 10 states tax benefits, but many of these offer exemptions for lower-income taxpayers. You should check your state’s specific tax laws for details.

To avoid a surprise tax bill, plan for potential taxes on your benefits. You can ask the IRS to withhold taxes from your Social Security payments by submitting Form W-4V, Voluntary Withholding Request. This proactively manages your tax liability.

Myth 4: Working in Retirement Always Means Losing Benefits

Some people believe if they work after claiming Social Security, they will automatically lose all their benefits. This misconception discourages many from earning extra income during retirement, even if they want or need to.

The truth is, you can work while receiving Social Security benefits. However, if you claim benefits before your Full Retirement Age (FRA) and your earnings exceed certain limits, the Social Security Administration (SSA) will temporarily withhold a portion of your benefits. These are called earnings limits.

For 2024:

• If you are under FRA for the entire year: The SSA deducts $1 from your benefits for every $2 you earn above $22,320.
• In the year you reach FRA: The SSA deducts $1 from your benefits for every $3 you earn above $59,520 (this only applies to earnings before the month you reach FRA).

Once you reach your Full Retirement Age, earnings limits disappear. You can earn any amount of money without having your Social Security benefits reduced. Your benefits will not be withheld.

Furthermore, any benefits withheld due to earnings limits are not lost permanently. When you reach your FRA, the SSA recalculates your benefit amount to credit you for the months they withheld benefits. This means you will receive a higher monthly payment for the rest of your life, effectively getting back some of the withheld amounts.

Working in retirement offers many benefits, from supplementing your income to staying active and engaged. Do not let this myth deter you from pursuing part-time work or a new venture.

Myth 5: Social Security Replaces All Your Retirement Income

A dangerous misconception is that Social Security will be sufficient to cover all your retirement expenses. Relying solely on Social Security for your retirement income can lead to significant financial hardship. This program was designed as a safety net, not a complete replacement for your pre-retirement income.

For most retirees, Social Security replaces only about 40% of their pre-retirement earnings. This percentage can be higher for lower-income earners and lower for high-income earners. The exact replacement rate depends on your lifetime earnings history and your claiming age.

Consider someone earning $50,000 per year throughout their career. Their Social Security benefit might be around $20,000 annually. This $20,000 will unlikely cover all their living expenses, healthcare costs, housing, and leisure activities.

To enjoy a comfortable retirement, you must supplement your Social Security benefits with other income sources. These typically include:

• Personal savings accounts (e.g., 401(k), IRA)
• Pensions from former employers
• Investment income
• Part-time work in retirement

The lesson here is simple: Social Security is a crucial piece of your retirement puzzle, but it is rarely the entire puzzle. Plan to save diligently throughout your working years to build a robust retirement portfolio. The Consumer Financial Protection Bureau offers resources on financial planning for retirement.

Myth 6: Divorced Spouses Cannot Claim on an Ex-Spouse’s Record

Many individuals believe that once they divorce, they lose any entitlement to Social Security benefits based on their ex-spouse’s work record. This is incorrect and can lead to missed benefits for eligible individuals.

You may be able to claim Social Security benefits based on an ex-spouse’s earnings record if you meet specific criteria:

• Your marriage lasted 10 years or longer.
• You are currently unmarried.
• You are age 62 or older.
• Your ex-spouse is entitled to Social Security retirement or disability benefits.
• The benefit you would receive based on your own work record is less than the benefit you would receive on your ex-spouse’s record.

The amount you receive does not reduce your ex-spouse’s benefits or the benefits of their current spouse. This is a common concern that deters many from applying. Your ex-spouse does not even need to know you are claiming on their record.

If your ex-spouse has not yet claimed benefits, but you meet the other criteria and have been divorced for at least two years, you can still apply for benefits. Your ex-spouse must be at least 62 years old for you to claim divorced spouse benefits.

This provision helps ensure financial security for individuals who dedicated a significant portion of their lives to a marriage, even if it ended. If you believe you might qualify, contact the Social Security Administration directly for precise guidance.

Myth 7: Medicare Premiums Have Nothing to Do with Social Security

Many people view Medicare and Social Security as entirely separate entities. While they are distinct programs, for most beneficiaries, Medicare Part B premiums are directly deducted from their Social Security checks. This connection often catches people by surprise.

When you enroll in Medicare Part B, which covers doctor visits and outpatient services, your monthly premium is typically automatically withheld from your Social Security benefit payment. This is the most common and convenient way for the premium to be paid.

The standard Part B premium changes annually. For 2024, the standard Part B premium is $174.70. However, some beneficiaries pay more. If your income exceeds certain thresholds, you will pay an Income Related Monthly Adjustment Amount, or IRMAA. This means high-income earners pay a higher Part B premium.

Your income from two years prior determines your IRMAA. For example, your 2024 Medicare Part B premiums are based on your modified adjusted gross income from 2022. This lag can be frustrating for those whose income has significantly decreased in recent years.

Understanding this link is crucial for budgeting. When you look at your Social Security benefit statement, remember that your net payment will be lower after the Medicare Part B premium deduction. For more information on Medicare, visit Medicare.gov.

Myth 8: My Social Security Statement is Always Correct

Your annual Social Security Statement is an incredibly valuable document. It provides an estimate of your future benefits and details your earnings record. Many people assume this statement is flawless, but errors can occur. Uncorrected errors on your earnings record can significantly reduce your future benefits.

The Social Security Administration relies on employers to report your earnings accurately each year. Mistakes can happen due to employer errors, incorrect Social Security numbers, or unreported income. These errors might include:

• Missing earnings for a specific year.
• Incorrect earnings amounts.
• Misspellings of your name.
• An incorrect date of birth.

If your earnings record is inaccurate, your estimated benefits will also be incorrect. Lower reported earnings translate directly to lower Social Security benefits in retirement. The SSA uses your 35 highest-earning years to calculate your benefit amount.

You should review your Social Security Statement annually. You can access your statement online by creating an account at My Social Security. Compare the earnings listed on your statement with your W-2 forms or tax returns for each year.

If you find an error, contact the SSA immediately. You typically have a limited time, generally three years, three months, and 15 days, after the year in which the wages were paid to request a correction. However, the SSA can sometimes correct errors beyond this limit if you provide sufficient proof of earnings. Always keep good records of your employment and earnings.

“The best preparation for tomorrow is doing your best today.” — H. Jackson Brown Jr.

Frequently Asked Questions

Can I get Social Security benefits if I have never worked?

Yes, you might qualify for benefits even if you have never worked, or if you have not worked enough to earn your own benefits. This generally applies to spouses, divorced spouses, widows, or widowers who can claim benefits based on their spouse’s or ex-spouse’s earnings record. Children of eligible workers may also receive benefits.

What is the earliest age I can claim Medicare benefits?

For most individuals, you become eligible for Medicare when you turn 65. You can typically enroll during a 7-month Initial Enrollment Period that starts three months before your 65th birthday, includes the month you turn 65, and ends three months after your 65th birthday.

Does delaying Social Security benefits past age 70 increase my payments further?

No, your Social Security benefits do not increase past age 70. You earn delayed retirement credits up to age 70. There is no financial advantage to delaying your claim beyond your 70th birthday. You should apply for benefits by that age to avoid missing out on payments.

Can I apply for Social Security online?

Yes, you can apply for Social Security retirement, spousal, and Medicare benefits online. The Social Security Administration’s website (ssa.gov) provides a secure portal for applications. You can also estimate benefits, check your earnings record, and manage your account online.

Will my Social Security benefits be reduced if I receive a pension from a government job not covered by Social Security?

Yes, if you receive a pension from a job where you did not pay Social Security taxes, your Social Security benefits might be reduced. This happens due to two provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). WEP can reduce your own Social Security benefit, and GPO can reduce spousal or survivor benefits you might receive based on another person’s record.

Disclaimer: This article is for informational purposes only. Benefits, programs, and regulations can change. We encourage readers to verify current information with official government sources and consult with qualified professionals for personalized advice.