Curious about Social Security and what’s true versus what’s myth? You’re not alone! In fact, a significant number of Americans hold misconceptions about Social Security. For instance, a 2024 survey by the TransAmerica Center for Retirement Studies found that 38% of current workers fear that Social Security benefits will disappear before they retire. Additionally, a 2023 Gallup poll revealed that 47% of non-retirees doubt they will receive Social Security benefits upon retirement, with confidence particularly low among those aged 30 to 49. These statistics highlight widespread misconceptions about the program’s future. In this article, we’ll break down five common myths about Social Security – plus three bonus Social Security myths to keep in mind. By getting the facts straight, you can approach your retirement with a clearer picture of how this essential program really works. Let’s debunk these Social Security myths together so you can make the best decisions for your future.
Myth #1: Social Security Is Going Bankrupt
Origin of the Myth: Concerns over the “Social Security solvency myth” stem from reports warning that the Social Security Trust Fund could run out of money in the next decade or two. This notion is frequently fueled by sensational media headlines, leaving many to wonder if the benefits they’ve been counting on for retirement will still be there.
Why It Started: The Social Security solvency myth arises from projections indicating that the trust fund may be depleted by 2035. Demographic shifts, such as longer life expectancies, declining birth rates, and a growing retiree-to-worker ratio, have created a financial imbalance that could impact the program. These reports aren’t incorrect, but they don’t mean Social Security will go bankrupt.
The Reality: Social Security isn’t disappearing. Even if the trust fund is exhausted, payroll taxes would still cover about 77–80% of benefits for years to come. Lawmakers have several options to shore up Social Security funding, including adjustments to taxes or benefits. The solvency concerns reflect potential adjustments, not a total shutdown, of Social Security. Debunking this Social Security myth is essential to restoring confidence in the system, which continues to provide critical support to retirees, the disabled, and survivors of deceased workers.
Myth #2: You Won’t Get Back What You Paid In
Origin of the Myth: A common Social Security myth is that people won’t receive a fair return on their contributions. This perception stems from a misunderstanding of how Social Security operates and a sense of disconnect when people see a portion of their earnings taken as Social Security taxes without seeing an immediate benefit.
Why It Started: This belief originates in part from Social Security’s structure, which redistributes funds rather than growing them like a traditional investment. This can make it difficult for higher-income earners to see Social Security as a “good deal,” especially if they live shorter lives and don’t collect for many years.
The Reality: Social Security isn’t designed as a direct investment. It’s an insurance program that redistributes wealth to provide a safety net for everyone. The program calculates benefits based on a progressive formula, which means lower-income workers get back more in benefits compared to their lifetime contributions. Most people receive a reasonable return on their contributions through retirement benefits, as well as through survivor and disability benefits. While wealthier contributors might not see the same rate of return, Social Security provides a vital foundation of financial security that helps prevent poverty among the elderly and disabled, regardless of life expectancy.
Myth #3: Social Security Is Only for Retirees
Origin of the Myth: Because Social Security is widely known as a retirement program, people tend to think it exclusively supports retirees, overlooking its other provisions.
Why It Started: This myth has been perpetuated by the fact that Social Security was initially intended to provide financial support to retirees. However, the program was later expanded to include additional benefits, creating a comprehensive safety net that goes beyond retirement support.
The Reality: Social Security is far more than a retirement program. It provides significant benefits for disabled workers, as well as for families of deceased workers. Nearly one-third of Social Security beneficiaries are not retirees. The disability insurance program protects workers who become disabled and can no longer earn a wage, while survivor benefits help families who’ve lost a primary wage earner. These aspects underscore that Social Security’s design is not just about retirement but about social insurance, supporting families through a variety of life events that impact financial stability. This myth about Social Security being only for retirees ignores the vital role the program plays in offering a broader safety net.
Myth #4: You Should Start Collecting Benefits as Soon as You’re Eligible
Origin of the Myth: Many people assume that they should start collecting Social Security at the earliest possible age (62), believing this approach will maximize the overall amount they receive. This “early bird” mentality is fueled by concerns over the program’s solvency and by an eagerness to tap into the funds as soon as possible.
Why It Started: This belief is understandable, as starting benefits early provides an immediate income stream. Some also fear that waiting might backfire if the program changes or if they don’t live long enough to benefit from a higher payout.
The Reality: While it can be tempting to start benefits early, this strategy often results in permanently reduced monthly benefits. Full retirement age varies depending on birth year (usually 66 or 67), and waiting until this age can mean receiving significantly more each month. For those who can wait even longer—up to age 70—benefits increase by about 8% annually due to delayed retirement credits. Those who wait will generally receive a higher, inflation-adjusted monthly benefit, which can be particularly valuable in covering living expenses over a potentially long retirement. This myth about Social Security often overlooks the importance of maximizing lifetime benefits rather than focusing on immediate cash flow.
Myth #5: Social Security Benefits Aren’t Taxed
Origin of the Myth: Initially, Social Security benefits were not taxed, leading some to assume they remain tax-free. This myth persists due to outdated knowledge about Social Security’s taxability.
Why It Started: When Social Security was introduced, benefits were indeed tax-free, reflecting the program’s mission to provide a financial safety net. However, in the 1980s, legislation changed to allow for partial taxation of benefits for higher-income retirees. Many people remain unaware of this change, leading to unpleasant surprises at tax time.
The Reality: For beneficiaries whose combined income (adjusted gross income plus 50% of Social Security benefits) exceeds certain thresholds, up to 85% of Social Security benefits can be subject to federal income tax. This tax provision primarily affects middle- and upper-income retirees. Being mindful of Social Security’s potential tax implications is crucial for effective retirement planning, and consulting with a fee-only financial advisor can help beneficiaries understand and prepare for their tax responsibilities.
Debunking Social Security Myths for a Secure Retirement
Understanding the truth behind these five myths about Social Security can help you plan with confidence and clarity. Social Security plays a critical role in supporting retirees, disabled workers, and families, but misinformation can undermine its value. By knowing the facts, you can approach Social Security with a clearer understanding of its benefits and limitations.
It’s essential to differentiate between Social Security facts and myths to maximize your benefits. With the right knowledge, you can avoid the pitfalls of common misconceptions, such as believing Social Security is going bankrupt or thinking that benefits aren’t taxable. Instead, plan with the assurance that Social Security was designed to be there for you through a combination of retirement, disability, and survivor benefits.
Additional Myths About Social Security
While we’ve covered five key myths, other misunderstandings are worth noting:
- Social Security Is Only for Low-Income Individuals: Social Security benefits are based on your earnings history, not your income level, making it valuable for people across all income brackets.
- Social Security Covers All Retirement Needs: Social Security was designed to supplement retirement income, not replace it. It’s important to have additional retirement savings.
- You Don’t Need Social Security If You Have a Pension: Many retirees rely on Social Security in addition to pensions and savings, as it provides an inflation-adjusted income source.
These additional myths about Social Security further illustrate the program’s complexities and the importance of accurate information. Separating Social Security facts and myths can empower individuals to make informed decisions that align with their financial needs.
Final Thoughts on Social Security Myths
Debunking myths about Social Security is essential for effective retirement planning. This program provides a foundation of financial security, yet misunderstandings can deter people from making optimal choices. With accurate information, you can leverage Social Security to enhance your retirement strategy and achieve a financially secure future.
If you have any questions about Social Security, or if you would like to speak with our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals, we would be happy to show you how our financial planning process can help you stay on track and achieve your financial goals. Please contact us for a complimentary discovery call at 631.218.0077. You can also send us a message directly.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, as well as our process, explore our detailed overview of services and approach.
