Social Security, a cornerstone of financial stability for millions of Americans, is nearing its 90th anniversary. This enormous and complex program, paying out “more than $120 billion in benefits a month to nearly 69 million retirees, people with disabilities and their family members,” stands as a testament to collective support. An “overwhelming majority of Americans across party lines support raising taxes to keep the program fiscally sound,” highlighting its critical role in our society, where it provides “a majority of family income for 2 in 5 people ages 65 and older.”
Given its immense importance and the significant impact it has on countless lives, it’s entirely understandable that concerns about Social Security’s present and future state are both prevalent and widespread. The program’s long history, marked by numerous changes, has unfortunately also given rise to a perplexing web of misconceptions. These misunderstandings can easily cloud judgment and lead to less-than-optimal financial decisions for individuals and families alike.
As we approach Social Security’s landmark 90th year, it’s more crucial than ever to separate fact from fiction. Dispelling these stubborn myths isn’t just an academic exercise; it’s about empowering you with accurate, actionable knowledge to navigate your financial landscape with confidence. Let’s dive into some of the most persistent Social Security myths and uncover the straightforward truths behind them.
1. **Myth: Social Security is going broke / will run out of money.**
The persistent fear that Social Security is on the brink of collapse is perhaps one of the most unsettling and widespread myths. Headlines often sensationalize the program’s financial challenges, leading many to believe that their hard-earned contributions will disappear entirely before they can claim benefits. This fear can cause unnecessary anxiety and even prompt people to make rash decisions, such as claiming benefits too early, which results in a permanent reduction.
However, the facts paint a much more reassuring picture: “As long as workers and employers pay payroll taxes, Social Security will not run out of money.” It operates as a “pay-as-you-go system,” meaning “Revenue coming in from FICA (Federal Insurance Contributions Act) and SECA (Self-Employed Contributions Act) taxes largely cover the benefits going out.” While it’s true that the program faces funding challenges and is starting to “pay out more than it takes in,” largely because “the retiree population is growing faster than the working population, and living longer,” this doesn’t equate to bankruptcy.
Social Security has a substantial surplus, which stood at “$2.72 trillion at the end of 2024,” providing a significant buffer. Even if this surplus is “projected to run out in 2034,” according to the latest annual report from the program’s trustees, “Even then, Social Security won’t be broke.” It will still collect tax revenue and pay benefits, albeit at a reduced rate of “81 percent of scheduled benefits.” Congress has historically intervened to shore up finances, as it did in 1983, and there’s strong public consensus for solutions like “eliminating the cap on payroll tax contributions” and “gradually increasing their own payroll contributions” to ensure its long-term solvency.
2. **Myth: The Social Security full retirement age is 65, or you must claim at 62.**
For many years, the age of 65 was synonymous with retirement and Social Security eligibility, a truth established when the program was created in 1935. This long-standing association has led to the persistent myth that 65 remains the definitive age for full benefits, or that 62 is the only option, even though claiming at 62 results in a permanent reduction. The reality is more nuanced and depends heavily on your birth year.
The “full retirement age, or FRA”—the age when a worker qualifies to file for 100 percent of the benefit calculated from lifetime earnings history—is now higher than 65 for most people. For instance, for individuals born in 1958, the FRA is “66 and 8 months”; for those born in 1959, it’s “66 and 10 months”; and for anyone born in “1960 and after,” it’s 67. This change was part of the 1983 overhaul, designed to “reduce Social Security’s costs,” and it’s being “phased in over time.” Claiming before your FRA, even at 62, “locks in a permanent reduction in monthly income,” which can be as high as “30% relative to your FRA monthly benefit” (assuming you were born after 1960 and have an FRA of 67).
The good news is that delaying benefits beyond your FRA can lead to “bigger paychecks.” For those born after 1943, your benefit “improves by 2/3rds of 1% for each month you delay receiving benefits, or 8% for each full year—and this caps out at age 70.” This means that by waiting until age 70, you could increase your monthly income by “24% by waiting from 67 to 70,” or an impressive “around 77% by waiting from 62 to 70.” Understanding your specific FRA and the implications of early versus delayed claiming is crucial for maximizing your retirement income.
3. **Myth: The annual Cost-of-Living Adjustment (COLA) always increases your benefit.**
Many Social Security recipients naturally anticipate a yearly increase in their benefits, thanks to the Cost-of-Living Adjustment (COLA). The belief is that COLA is a guaranteed annual raise, ensuring that benefits continually grow. While it’s true that “Since 1975, Social Security law has mandated that benefit amounts be adjusted annually to keep pace with inflation,” the critical distinction is that this adjustment does not necessarily “produce a yearly increase.
The COLA is directly “tied to a federal index of prices for select consumer goods and services called the CPI-W” (Consumer Price Index for Urban Wage Earners and Clerical Workers). Benefits are adjusted annually based on changes in this index from the third quarter of one year to the third quarter of the next. If the CPI-W shows an increase, benefits are adjusted upward, as seen with “a 3.2% COLA increase for 2024” based on 2023’s measurement, or a “2.5 percent increase in prices, so benefits are 2.5 percent higher in 2025” based on 2024’s third quarter data.
However, the crucial point is that “if the index doesn’t show a statistically measurable rise in prices—if there’s effectively no inflation—then there’s no adjustment to benefits.” This scenario has indeed occurred, with “no COLA increase” reported three times since the current formula was adopted: in “2010, 2011 and 2016.” The process is “automatic; it does not involve the president or Congress” unless they “take separate action to change the COLA.” So, while annual adjustments are mandated, a guaranteed increase is not.
4. **Myth: You’ll never get back all the money you put into the program.**
A common concern among workers is the belief that their lifetime contributions to Social Security, in the form of payroll taxes, will never be fully recouped during their retirement. This myth stems from a misunderstanding of Social Security’s fundamental purpose and design, often comparing it to a private investment account where a direct return on contributions is expected. This perspective overlooks the program’s crucial role as a safety net.
The facts reveal a different reality: “Everyone’s situation is different, but if you live a long time, you may collect more than you contributed to the system.” Social Security is not merely a savings account; it’s explicitly “designed to provide a safety net of income for the retired, the disabled, and survivors of deceased insured workers.” The contributions made by you and your employers serve a dual purpose: they provide “Current retirees and other Social Security recipients with payments,” and they establish “A guaranteed lifetime income benefit when you reach retirement.
Crucially, Social Security provides “an inflation-protected guaranteed income stream in retirement,” acting as a vital safeguard “against the risk you’ll outlive your savings.” This means that “Even if you live to 100 or older, you’ll continue to receive income every month.” Furthermore, the program extends its protection to families: “If you’re married and you predecease your spouse, your spouse can also receive survivor benefits until their death, if higher than their own benefits.” It’s an intergenerational social insurance program, not a personalized investment vehicle.
5. **Myth: Your ex-spouse’s actions could negatively impact your Social Security benefits.**
For individuals who have been divorced, a significant concern often arises about whether their former spouse’s financial decisions or claiming choices could somehow diminish their own Social Security benefits. This apprehension is understandable, as many believe that claiming on an ex-spouse’s record might come at the cost of the ex-spouse’s own benefits. The good news is that this is a misconception, and the rules are designed to protect both parties.
The truth is that if you meet specific conditions—namely, having been married for “more than 10 consecutive years” and not having remarried—you “may be entitled to spousal benefits.” This provision allows you to potentially claim benefits based on your ex-spouse’s work record. You can even claim these “divorced spousal Social Security benefits before your FRA” (although the monthly payment amount will be reduced in comparison to claiming at FRA), which qualifies you to receive “up to 50% of your ex-spouse’s full retirement amount” if you claim at your FRA.
What’s particularly reassuring is the explicit clarity from the Social Security Administration on this matter: “There’s no need to discuss this with your ex-spouse, and your claim does not reduce or affect your ex’s benefits in any way, and vice versa.” This means that your decision to claim divorced spousal benefits will not impact your ex-spouse’s benefits, nor will their claiming decisions affect yours. It simply provides you with an additional option for your retirement income, ensuring you receive “the higher benefit” between your own and what you’re entitled to from your ex-spouse’s record.
6. **Myth: Your benefits are based only on wages you’ve earned before age 65.**
Many people mistakenly believe that once they hit age 65, their earning years for Social Security calculations are effectively over. This misconception can lead individuals to think that any income earned after this age won’t contribute to their future benefits, potentially influencing decisions about working longer or part-time in retirement. However, the system is designed to reward continued contributions throughout your working life, regardless of age.
The actual calculation for your Social Security benefits is more comprehensive and inclusive than many realize. Your benefits are “calculated based on your highest 35 years of earnings.” This crucial detail means that these years “don’t have to be consecutive years or before age 65.” The Social Security Administration looks at your entire earnings history and selects the 35 years in which you earned the most, adjusted for inflation, to determine your “average indexed monthly earnings.
Therefore, if “you work past age 65, those earning years will be included, as long as they are high enough to be part of your highest 35 years.” This is true even if you only work “part-time after turning 65.” For those who may have had fewer than 35 years of covered employment, “zeros will be included in the calculation” for the missing years. To be eligible for benefits at all, you generally need “a minimum of 10 years of covered employment” (which equates to “40 credits” in the Social Security system), with the “2025 income requirement [being] $1,810 for each credit.” So, working longer, especially in higher-earning years, can indeed boost your ultimate benefit.
7. **Myth: You can claim early, then get an increase once you reach full retirement age.**
A common piece of misinformation circulating is the idea that claiming Social Security benefits early, typically at age 62, allows you to receive a reduced amount initially, but then your checks will automatically increase to your Full Retirement Age (FRA) benefit amount once you reach your FRA. This sounds appealing, offering the best of both worlds – early income with a later boost – but it is a “big misperception” that can lead to significant financial disappointment.
The unequivocal truth is that “There’s no increase in income once you’ve claimed your Social Security retirement benefit” based on simply reaching your FRA. The reduction you accept by claiming early is, as previously discussed, a permanent one. Once you lock in that reduced monthly payment by claiming before your FRA, that is essentially your new base benefit amount going forward, subject only to Cost-of-Living Adjustments (COLA), not a fundamental recalculation at FRA.
However, there is a distinct, strategic maneuver known as “claim, suspend, and restart” that can seem similar but operates under different rules. Anyone receiving a benefit can voluntarily ‘suspend’ that benefit after they reach FRA and resume it as late as age 70.” If you choose this option, the “annual benefit will increase by 8% per year of delay up until age 70.” This strategy allows for growth on an already claimed benefit, but it requires active suspension and is not an automatic increase upon reaching FRA. Additionally, you can “cancel your Social Security claim if you do so within the first 12 months of receiving benefits” and repay all received amounts (including those a current spouse or family member received based on your benefit), then claim again later for a larger monthly payment, but this can only be done “once in their lifetime.”
Navigating the complexities of Social Security requires a clear understanding of its multifaceted nature, extending beyond just solvency and claiming ages. As we continue to dispel common misbeliefs, it becomes evident that many anxieties stem from comparing this essential social insurance program to private financial vehicles or misunderstanding its funding mechanisms and specific rules for various beneficiary groups. Let’s further unravel more stubborn myths that can cloud sound financial planning and empower you with accurate information.
8. **Myth: Social Security benefits are all I need in retirement.**
It’s a comforting thought for many pre-retirees: reaching retirement age and relying solely on Social Security for a comfortable lifestyle. This myth suggests that the monthly Social Security check will be sufficient to cover all living expenses and allow for a worry-free retirement. However, this belief can lead to significant financial shortfalls, as the program’s design and typical benefit amounts reveal a different reality.
In truth, Social Security is explicitly designed to replace only a portion of pre-retirement income, generally around 40% for the average earner. Most financial experts and retirement planners advise that individuals will likely need as much as 80% of their pre-retirement income to fund a truly comfortable retirement. With the average Social Security check for retired workers hovering around $1,900 a month, it becomes quite clear that this amount alone might make it challenging to meet daily living expenses, let alone enjoy hobbies or travel, without additional income sources or personal savings. The program acts as a vital income floor, not a ceiling.
Furthermore, if you plan on working during retirement, that could also affect your benefits, which further complicates the idea of Social Security being a sole source. If you are under your full retirement age, a portion of your payments will be deducted if your earnings exceed a certain limit; for example, $1 is deducted from your payments for every $2 you earn above the annual limit, which was $22,320 in 2024. Even at full retirement age, a different earnings limit applies, where $1 in benefits is deducted for every $3 earned above the limit, which was $59,520 in 2024. Therefore, Social Security is best viewed as a foundational element of your retirement income plan, ideally supplemented by personal savings, investments, and pensions.
9. **Myth: Social Security Acts the Same as a Retirement Account.**
Many individuals assume Social Security functions much like a personal 401(k) or other private retirement savings account. The reasoning often stems from the fact that you pay into it through payroll taxes throughout your working life, and then you receive payments from it in retirement. This perceived similarity leads to the misconception that it operates on the same principles of direct contributions and investment growth as a private account.
However, there are fundamental differences that distinguish Social Security from a personal retirement account. For one, the benefits you receive from Social Security are primarily determined by your highest 35 years of earnings history, rather than being directly tied to the precise amount you contributed or how those contributions performed in investments. Unlike a 401(k), where your account balance fluctuates with market performance, Social Security is a pay-as-you-go system where current workers’ contributions largely fund current retirees’ benefits.
Another critical distinction lies in how early withdrawals impact payouts. While withdrawing from a private retirement account earlier in life typically means you’ll have less money overall, the exact amount you can regularly pull out might vary based on investment performance. With Social Security, claiming benefits before your Full Retirement Age (FRA) guarantees a permanently lower monthly payout for the rest of your life. This fixed reduction is a key difference from the more flexible, investment-driven outcomes of a private retirement savings account.
10. **Myth: Social Security Benefits Can’t Be Taxed.**
A pervasive myth is that once you receive your Social Security benefits, they are entirely tax-free. This belief often stems from the fact that for many years, Social Security benefits were indeed not subject to federal income tax. However, changes implemented decades ago mean that for a significant portion of recipients, these benefits are now, in fact, taxable.
The truth is that federal income taxes on Social Security benefits were introduced in 1984 as part of amendments to the Social Security Act. Today, whether your benefits are taxed depends on your “provisional income,” which is calculated as the sum of your adjusted gross income, tax-exempt interest income, and half of your Social Security benefits. If this provisional income exceeds a certain threshold—$25,000 for single filers or $32,000 for those married filing jointly—then up to 50% of your benefits may be subject to federal income tax. For higher income thresholds, up to 85% of your benefits can be taxed.
Furthermore, beyond federal taxes, your Social Security benefits might also be subject to state income taxes, depending on where you reside. While most states do not tax Social Security benefits, there are currently nine states that do: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Therefore, it’s crucial to understand your total financial picture in retirement, including all sources of income, to accurately assess your tax liability and avoid unpleasant surprises.
11. **Myth: A Pension Automatically Reduces Social Security Benefits.**
For individuals with a pension, particularly those from government employment, there’s a common concern that their pension will automatically lead to a reduction in their Social Security benefits. This myth originates from past provisions like the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which indeed could reduce Social Security payments for those who received a pension from a job not covered by Social Security taxes.
The good news is that this myth is largely outdated. With the passage of the Social Security Fairness Act, the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) have been repealed. This means that, generally speaking, your pension will no longer reduce your Social Security benefits, assuming your employer withheld FICA (Federal Insurance Contributions Act) taxes from your paychecks throughout your career. If FICA taxes were withheld, your pension should not affect your Social Security benefits at all.
However, a crucial nuance remains: if your employer did not withhold FICA taxes from your paychecks—a scenario common for some state and local government employees in the past—then you would not have contributed to Social Security through that employment. In such cases, you would be ineligible to file a claim for Social Security benefits under your own work record. You could still be eligible to claim benefits under eligible spousal benefits, if applicable, based on a spouse’s work record. The key takeaway is that for the vast majority of workers today, a pension does not automatically reduce Social Security benefits, particularly with the recent legislative changes.
12. **Myth: All of Your Earned Income Is Subject to Social Security Taxes.**
Many people assume that every dollar they earn throughout their working lives is subject to Social Security taxes. It’s a natural assumption given that these payroll taxes, known as FICA taxes, are deducted from nearly every paycheck. However, this is a misconception; there’s actually a cap on the amount of income subject to Social Security taxation each year.
The truth is that while the majority of American wage earners do pay Social Security taxes on all their earnings, there is a maximum taxable earnings limit that applies annually. For instance, in 2024, the first $168,600 of your earned income in a year was subject to Social Security taxes. Any income earned above this threshold is not subject to Social Security contributions from either you or your employer.
This cap means that high-income earners contribute to Social Security only up to this limit, while those earning below or at the cap contribute on all their earned income. This aspect of the system influences the overall revenue stream for Social Security and has been a topic of policy discussion, with proposals such as eliminating or raising the cap to shore up the program’s finances. Understanding this cap is crucial for financial planning, as it defines the upper limit of your direct contribution to the Social Security system in any given year.
13. **Myth: Congress Doesn’t Contribute to Social Security.**
There’s a persistent belief that members of Congress are somehow exempt from paying into the Social Security system, separating themselves from the very program they oversee for millions of Americans. This myth often fuels public frustration, suggesting a disparity between the rules for lawmakers and the general populace. However, this notion is based on outdated information and does not reflect current realities.
Historically, it was true that senators and representatives, along with most civilian federal employees, were not covered under Social Security. Instead, they participated in a separate program known as the Civil Service Retirement System (CSRS). This historical fact likely contributed to the longevity of the myth. However, this changed significantly with the 1983 passage of amendments to the Social Security Act.
Beginning in 1984, all federal employees hired after 1983 were mandated to participate in Social Security. This included all members of Congress, who were compelled to participate regardless of when they were first elected. While those already in office before 1984 were generally allowed to remain in CSRS, the rule shift ensured that new members of Congress, and eventually all members, contribute to Social Security just like the vast majority of American workers. Therefore, today, every member of Congress participates in and contributes to Social Security.
14. **Myth: Social Security Is Burdened by Undocumented Immigrants.**
One of the most contentious and widely circulated myths is that undocumented immigrants are a drain on the Social Security system, depleting its funds and contributing to its financial challenges. This claim often surfaces in public discourse and can stir significant debate and misinformation.
However, studies and official data largely contradict this myth, often pointing to the opposite effect. Lawful noncitizens who are authorized to work in the United States by the Department of Homeland Security can indeed legally qualify for Social Security. Once authorized, as long as they work for an employer that withholds FICA taxes or pays FICA themselves as self-employed individuals, they contribute to Social Security and are eligible to collect benefits.
For undocumented workers, while they are not legally eligible to pay into or collect from Social Security, many do contribute to the system. Some use an Individual Taxpayer Identification Number (ITIN) to pay taxes, including payroll taxes, primarily to maintain good standing with the IRS, even though they cannot use an ITIN to collect benefits. Others may use fraudulent or stolen Social Security numbers to gain employment, inadvertently contributing to the system. The disparity between contributions and benefits claimed by unauthorized workers is substantial: the Social Security Administration estimated that in 2010, unauthorized immigrant workers and their employers contributed $13 billion in payroll taxes, while only $1 billion in benefit payments went to unauthorized workers. This resulted in a $12 billion surplus to Social Security in just one year, with some estimates suggesting a $100 billion surplus over a decade. These figures suggest that undocumented immigrants, far from burdening the system, have in fact provided a significant financial boost to Social Security.
Understanding Social Security in its entirety is not just about dissecting complex rules; it’s about recognizing its foundational role in America’s financial landscape. As this vital program approaches its 90th year, the imperative to separate fact from persistent fiction becomes ever clearer. By debunking these myths, we empower individuals to make more informed decisions about their retirement planning, fostering a greater sense of security and clarity around a program that touches nearly every American life. Navigating your financial future with confidence begins with reliable, actionable knowledge, and that’s precisely what these truths about Social Security aim to provide.
