Most people assume they have a decent grasp of how Social Security operates. The reality is that a surprising number of Americans are working from outdated assumptions, half-remembered headlines, or plain misinformation. The four myths explored below are among the most consequential ones to get wrong.
Myth #1: Social Security Will Cover Most of Your Retirement Expenses
On average, Social Security replaces only about 40% of pre-retirement income, and it was never designed to be your sole income source. It’s intended to be one component of a broader retirement income strategy. That gap between what people expect and what the program actually delivers is where a lot of retirement plans quietly fall apart.
If you earn an average paycheck, Social Security will replace about 40% of it. The problem is that most retirees need somewhere between 70% and 80% of their former income to maintain a comfortable lifestyle. That shortfall has to come from somewhere, whether savings, a pension, part-time work, or investment income.
Despite this, Social Security is key to older Americans’ financial health, providing a majority of family income for roughly two in five people ages 65 and older. For those individuals, that reliance often reflects limited savings rather than deliberate planning. Many people retire on just Social Security not because they want to, but because they face too many barriers to building retirement savings.
While Social Security can be a supplemental income source for retirees, it alone is unlikely to provide enough income for most individuals. Other streams of income are often needed by retirees to maintain their desired lifestyle. Planning as if it will cover everything is one of the more expensive mistakes a future retiree can make.
Myth #2: You Must Claim at 62, or You Have to Wait Until 65
Some people think they must claim their Social Security benefits at age 62. Age 62 is the earliest you can claim, but it’s not the only age to do so. There’s also a persistent separate belief that full retirement age is still 65, which is simply no longer accurate.
A recent survey by insurance company Allianz Life found that a majority of Americans, specifically around 55%, still believe the Social Security full retirement age is 65. In practice, full retirement age now falls between 66 and 67 depending on when you were born. If you were born in 1960 or later, your full retirement age is 67.
If you claim Social Security benefits before your full retirement age, you lock in a permanent reduction in monthly income. Claiming at 62 translates to a reduced monthly income of 30% relative to your full retirement age monthly benefit, assuming you were born after 1960 and have a full retirement age of 67. That reduction doesn’t go away once you hit 65 or 66. It stays with you for life.
Social Security payments can be sharply and permanently reduced by as much as 30% if taken before full retirement age. This initial reduction also compounds over time, since cost-of-living adjustments are based on this amount and retirement could last 25 years or longer. Additionally, your selections don’t just impact you – they could permanently affect the benefit for your surviving spouse. On the flip side, delaying past full retirement age boosts payments by roughly 8% per year all the way up to age 70.
Myth #3: Social Security Is Going Bankrupt
This is perhaps the loudest, most persistent myth swirling around the program. The word “bankrupt” gets thrown around, and it creates genuine fear, particularly among younger workers who wonder whether the system will exist at all by the time they retire. The real picture is more nuanced than the headlines suggest.
Social Security is not going bankrupt and is not currently cutting benefits. According to federal projections from the Social Security Trustees and the Congressional Budget Office, the program is facing a long-term funding gap that could lead to automatic benefit reductions in the 2030s if Congress does not act. That’s a genuine challenge, but it’s a very different thing from collapse.
The Old-Age and Survivors Insurance trust fund is now projected to be exhausted in fiscal year 2032, roughly one year earlier than estimated previously. The Congressional Budget Office estimates that this would result in an immediate across-the-board benefit cut of 28% in 2033, the first full year after exhaustion. Still, benefits would continue flowing. The program wouldn’t simply shut off.
As long as workers and employers pay payroll taxes, Social Security will not run out of money entirely. The good news is that there’s still time for Congress to act, and this isn’t exactly an unprecedented situation. Social Security was just months away from running out of money in the early 1980s before changes were made. History shows the program has been adjusted before, and policymakers have a range of tools available to address the shortfall.
Myth #4: Social Security Benefits Are Always Tax-Free
A lot of retirees are genuinely caught off guard when they discover their Social Security checks aren’t immune from the IRS. The belief that benefits are tax-free is understandable in a historical sense, since they weren’t always taxable. But the rules changed decades ago, and yet the myth lives on.
In 1983 Congress changed the law by specifically authorizing the taxation of Social Security benefits. This was part of the 1983 Amendments, which overrode earlier administrative rulings from the Treasury Department. Today, whether you owe taxes depends on your total income from all sources combined.
For 2026, if you file as a single filer or head of household, you can have combined income up to $25,000 before any portion of your Social Security benefits becomes taxable. For married couples filing jointly, the threshold is $32,000. Above these amounts, up to 50% of your benefits may be taxable, and if your combined income exceeds $34,000 as a single filer or $44,000 as a married couple filing jointly, up to 85% of your benefits may be taxable.
The income thresholds for Social Security taxation are not inflation-adjusted. The $25,000 and $32,000 base amounts were set in 1983. The $34,000 and $44,000 adjusted base amounts were added in 1993. Neither has ever been indexed for inflation. A retiree earning the equivalent of $25,000 in 1983 would need roughly $80,000 today to have the same purchasing power. Because the thresholds are frozen, a growing number of retirees are being pulled into taxable territory simply because of inflation over time.
It’s also worth noting a recent development that has caused widespread confusion. Despite what many Americans may have read or heard, the 2025 Tax Act does not exempt Social Security benefits from taxation. In fact, the taxation of Social Security benefits hasn’t changed at all. What the new law did introduce is a deduction: taxpayers age 65 or older can each claim a $6,000 deduction for tax years 2025 through 2028, which is reduced by 6% for adjusted gross income exceeding $75,000 for individuals or $150,000 for joint filers. That’s a relief measure, not a full exemption.
Myth #5: Claiming Early Locks You Out of Any Future Adjustments
Some workers believe that once they claim benefits early, the number on their check is fixed forever with no upward movement at all. That’s not entirely accurate. The permanent reduction in base benefit is real, but benefits don’t stay completely static over time.
Unlike other retirement income sources, monthly Social Security payments are designed to keep pace with the rise in the cost of living. Every year, the Social Security Administration evaluates inflation data and decides whether to institute a benefit increase called a cost-of-living adjustment, or COLA. These annual adjustments apply regardless of when you originally claimed.
Based on the increase in the Consumer Price Index from the third quarter of 2024 through the third quarter of 2025, Social Security beneficiaries and Supplemental Security Income recipients received a 2.8% COLA for 2026. That means even recipients who claimed early at age 62 saw their checks increase. The base amount is permanently reduced, yes, but it still gets adjusted upward each year when inflation warrants it.
There is one key nuance here. Because cost-of-living adjustments are calculated based on your starting benefit amount, an early claimant compounds that initial reduction year over year. A smaller starting number means slightly smaller dollar adjustments with each annual COLA, so the gap between an early claimant and someone who waited continues to widen in real terms throughout retirement.
Myth #6: Your Benefits Are Based on Your Last Salary
People often assume that whatever they’re earning in the final years of their career is what the Social Security Administration uses to calculate their benefit. That’s not how the formula works at all. Your earnings history is far more nuanced than that.
Benefits are calculated based on your highest 35 years of earnings, and they don’t have to be consecutive years or years before age 65. 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. Even working part-time after turning 65 may be factored in if it lands among your highest-earning years.
If you don’t have 35 years with earnings, zeros will be included in the calculation. That’s an important detail for people who took extended time away from the workforce. Every zero-earning year averaged into the formula drags the benefit down, which means working a few extra years later in life can actually have a meaningful positive impact on your monthly payment.
To be eligible for Social Security at all, you must have a minimum of 10 years of covered employment, which equates to 40 credits in the Social Security system. The 2025 income requirement was $1,810 for each credit. Understanding this structure matters for anyone with a non-traditional career history, including freelancers, caregivers, or people who spent time working abroad.
Myth #7: Divorced Spouses and Widows Have No Access to Extra Benefits
Spousal and survivor benefits represent one of the least understood corners of the entire Social Security system. Many divorced individuals and surviving spouses leave significant money on the table simply because they don’t know what they’re entitled to claim.
When a Social Security beneficiary dies, their surviving spouse is eligible for survivor benefits. More than 3.8 million widows and widowers, including some divorced from late beneficiaries, were receiving survivor benefits as of September 2025. You need not have been married to a beneficiary at the time of their death to receive survivor benefits. You may qualify as the divorced former spouse of a Social Security recipient.
If you were married for at least 10 years, you may qualify for spousal benefits based on a former partner’s work record. You can claim up to 50% of their benefit amount, even if they haven’t claimed yet. Your own benefits stay the same, and claiming an ex-spouse’s benefits does not reduce what they receive. Both parties can collect their full amounts without affecting each other’s payments.
According to the most recent SSA data, women make up 95% of the nearly 641,000 people receiving spousal or survivor benefits on the earnings record of a partner they divorced. That figure reflects how differently retirement assets and career histories have been distributed between spouses for many decades. As of March 2025, survivor benefits accounted for 8.4% of all Social Security recipients, providing payments to more than 5.8 million people.
Myth #8: Working While Collecting Benefits Always Reduces What You Get Permanently
There’s a widely held belief that taking any job while receiving Social Security is a losing move, that the government simply claws back your benefits dollar for dollar and you end up worse off. The reality is more precise, and understanding it can actually open up smart planning options.
If you claim early and keep working, some of your benefits may be temporarily withheld, but these amounts aren’t lost permanently. Once you reach full retirement age, Social Security recalculates your benefit upward to account for the months when payments were withheld. So money that seems to disappear early can come back to you over time.
If you are below full retirement age and continue earning income from work, your benefits may be temporarily reduced. In 2025, the earnings test for people who will reach full retirement age in a later year was $23,400. Social Security deducted $1 in benefits for every $2 earned above that cap. Once you hit full retirement age, the earnings limit disappears entirely.
While delaying benefits increases monthly payments, working while claiming isn’t universally harmful or beneficial. Factors like health, family life expectancy, and tax considerations should all be weighed for your personal situation. The right answer genuinely depends on your individual circumstances, which is worth acknowledging in an era where there’s no shortage of generic advice floating around.
What All of This Actually Means for Your Retirement Plan
Social Security is not a simple program, and the myths surrounding it don’t persist out of nowhere. These myths continue to circulate because Social Security and Medicare have many rules and exceptions that can be difficult for the average person to fully understand. Headlines that strip away context, outdated assumptions passed down from prior generations, and political noise all contribute to the fog.
The average monthly Social Security retirement benefit in 2025 was approximately $1,976. That figure sounds reasonable until you consider that most households need considerably more than that to cover housing, healthcare, and basic living expenses in retirement. Collecting Social Security benefits is an important component of any retirement income withdrawal strategy, but the federal program can also be complicated to understand.
The four core myths explored here share a common thread: they lead people to underestimate what they’re owed, overestimate how far benefits will stretch, or misunderstand the rules around timing and taxes. Getting any one of these wrong can cost thousands of dollars over the course of retirement. Getting several of them wrong compounds that cost substantially.
Social Security is a foundational piece of retirement income for tens of millions of Americans. Understanding what it actually is, rather than what people assume it to be, is one of the most financially meaningful things a future retiree can do. The rules are complex, but they’re knowable. And for most people, the time spent learning them pays off in a very direct way.
