Social Security is one of the most vital sources of income for millions of retirees in the United States. However, despite its importance, there are many myths surrounding the program that can cause confusion and even lead people to make poor financial decisions. These misconceptions can have significant consequences on your retirement planning. In this post, we’ll address 10 common myths about Social Security and help you better understand how to make the most of your benefits.

1. Social Security Won't Be There When I Retire

One of the most persistent myths about Social Security is that it will run out of money before you retire. While it’s true that the system faces long-term financial challenges, it is unlikely that Social Security will cease to exist altogether. The program is funded primarily through payroll taxes, and though the trust fund may face deficits in the coming decades, the system can continue paying benefits through ongoing tax revenues.

According to the Social Security Administration (SSA), if no changes are made to the program, Social Security will still be able to pay about 83% of benefits starting in 2035. This means that while future retirees may see a reduction in benefits if the system isn’t reformed, Social Security will not simply disappear. It’s important to stay informed about proposed reforms and plan accordingly, but it's most likely that Social Security will always still be there in some form.

2. Social Security Benefits Are Only for Retirees

Another common myth is that Social Security benefits are only for retirees. In reality, Social Security provides benefits to a wide range of individuals. These include retirees, but also disabled workers, survivors of deceased workers, and children of deceased or disabled workers. The program is designed to provide financial support to individuals and families in various circumstances.

For example, if you become disabled before retirement, you may be eligible for Social Security Disability Insurance (SSDI). Similarly, surviving spouses and children may be eligible for survivor benefits if a family member passes away. This broad range of benefits makes Social Security an essential safety net for many people, not just retirees.

3. Social Security Will Be Enough to Live On in Retirement

Many people assume that Social Security will cover all of their living expenses in retirement, but this is far from the truth. Social Security is intended to be a supplement to your retirement savings, not your primary source of income. In fact, the average monthly benefit for a retired worker is currently around $1,920, which in many cases may not be enough to cover all your expenses, particularly if you have significant healthcare costs or live in an area with a high cost of living.

To ensure a comfortable retirement, it’s crucial to have additional sources of income, such as personal savings, employer-sponsored retirement plans like 401(k)s, and other investments. Relying solely on Social Security is unlikely to provide the financial security you need in your later years. Planning ahead and diversifying your retirement income sources will give you the best chance of a secure and fulfilling retirement.

4. I Can Start Collecting Social Security Benefits at Any Time After Age 62

While you can technically begin collecting Social Security benefits at age 62, doing so may not always be the best option. The full retirement age (FRA) for most people born after 1960 is 67. If you start taking benefits before reaching FRA, your monthly benefit will be permanently reduced. The reduction can be as much as 30% if you claim benefits at age 62 instead of waiting until your FRA.

On the other hand, if you wait until after your FRA to begin collecting benefits, your monthly benefit will increase by up to 8% per year until age 70. This means that delaying benefits can result in a higher lifetime benefit, which is especially important if you expect to live a long time in retirement. It’s essential to weigh the pros and cons of claiming early versus waiting to maximize your lifetime benefits.

5. Social Security Benefits Are Tax-Free

Another misconception is that Social Security benefits are not subject to taxes. In fact, depending on your income level, a portion of your Social Security benefits may be taxable. If you have other sources of income in retirement, such as pension payments or withdrawals from retirement accounts, your Social Security benefits may be taxed at rates ranging from 0% to 85%.

The IRS uses a formula to determine whether your benefits are taxable, based on your combined income (which includes your adjusted gross income, tax-exempt interest, and half of your Social Security benefits). If your combined income exceeds certain thresholds, you’ll owe taxes on a portion of your benefits. It's important to plan for this possibility when preparing for retirement to avoid unexpected tax bills.

6. Social Security Benefits Are Based Solely on What I Contribute

Some people believe that their Social Security benefits are directly tied to how much they have paid into the system through payroll taxes. While it is true that your lifetime earnings influence the amount of your benefits, it’s not a simple one-to-one correlation. Social Security benefits are calculated using your highest 35 years of earnings, adjusted for inflation. If you have fewer than 35 years of earnings, the SSA will use zeros for the missing years, which can lower your benefit amount.

Additionally, Social Security benefits are based on a progressive formula, meaning lower lifetime earners receive a higher percentage of their pre-retirement income than higher earners. As a result, high earners may not receive a benefit that reflects the full extent of their lifetime contributions to the system. It’s important to understand how benefits are calculated and to plan accordingly, especially if you anticipate a long retirement.

7. If I Work After I Start Collecting Social Security, My Benefits Will Be Reduced

Many individuals assume that if they continue to work after they start collecting Social Security, their benefits will be permanently reduced. However, this is not the case. If you are under your full retirement age (FRA) and continue to work, Social Security will temporarily withhold a portion of your benefits if your income exceeds a certain threshold. For 2025, the income limit is $23,400 per year. For every $2 you earn over this limit, $1 in benefits will be withheld.

Once you reach your FRA, there is no limit on how much you can earn without affecting your benefits. Additionally, any benefits that were withheld due to your earnings before FRA will be restored to you in the form of higher monthly payments once you reach FRA. This means that working while receiving Social Security can result in a higher lifetime benefit, especially if you have many years of work ahead of you.

8. My Social Security Benefits Are Guaranteed to Increase Each Year

It’s commonly believed that Social Security benefits automatically increase every year, but this is only true in specific circumstances. Social Security benefits are adjusted for inflation through the Cost-of-Living Adjustment (COLA). If inflation rises, benefits are increased accordingly, but if inflation is low or even negative, there may be no COLA increase in a given year.

In years where there is a COLA adjustment, the increase is usually modest. For example, in 2025, the COLA will be 2.5%, and in 2024, it was 3.2%. The largest increase in recent history was in 2022, when Social Security recipients received an 8.7% increase due to higher inflation. These types of large increases are rare, so it’s important to account for the potential for lower COLA increases when planning for future living expenses in retirement.

9. Social Security Is Only for People Who Need It

Some people believe that Social Security is only for low-income individuals or those who have no other retirement savings. However, Social Security is designed to provide a safety net for everyone, regardless of income level. The program offers a form of financial security in retirement, especially for those who may not have saved enough on their own or who are unable to work due to disability or death.

However, even if you have significant retirement savings, Social Security can serve as a valuable supplement, helping to stretch your savings further. The more you can rely on Social Security to cover basic living expenses, the more flexibility you’ll have in managing your other retirement income sources.

10. I Can’t Collect Social Security If I’m Married

Many people think that they cannot receive Social Security benefits if they are married. This is not true. In fact, spouses may be entitled to Social Security benefits based on their spouse’s earnings record, even if they have little or no work history themselves. This is called a spousal benefit, and it allows the lower-earning spouse to receive up to 50% of the higher-earning spouse’s benefit, depending on when they start claiming.

Widows and widowers may also be eligible for survivor benefits, which can be as much as 100% of the deceased spouse’s benefit. These rules ensure that married individuals and their families can continue to receive financial support through Social Security, even if one spouse passes away or has limited work history.

Maximize Your Social Security Benefits

Understanding Social Security and dispelling the myths surrounding it is essential for making the most of the benefits available to you. By separating fact from fiction, you can make informed decisions about when to start collecting benefits, how to maximize your payout, and how to plan for your retirement.

To help you navigate the complexities of Social Security, we’ve created a free guide on maximizing your Social Security benefits. Download it today to help make sure you are taking maximum advantage of the benefits available to you.

Download the Free Social Security Guide

Want some personalized guidance on maximizing your benefits? Reach out to our office to schedule a free initial strategy session with our Social Security specialist!

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Sources: 

https://www.ssa.gov/news/press/releases/2024/#5-2024-1

https://www.bankrate.com/retirement/average-monthly-social-security-check/ 

https://www.ssa.gov/oact/cola/colaseries.html 

This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.