For many Americans, Social Security is the largest source of income in retirement. Despite that, there is still a lot of confusion about how benefits work. Basing your claiming strategy on bad advice can lead to lower lifetime benefits and unexpected taxes.
Here are five common Social Security myths you should understand before claiming benefits:
Myth #1: Everyone Should Claim Social Security at Age 62
Many people assume they should begin benefits as soon as they become eligible at age 62.
The Reality: Claiming early permanently reduces your monthly benefit.
If you elect to claim at age 62, your benefit will be about 30% lower than if you wait until your Full Retirement Age, which is between age 66 and 67 depending on your birth year.
If you delay beyond Full Retirement Age, your benefit increases by about 8% per year until age 70.
Example: A person eligible for $2,500 per month at Full Retirement Age might receive only about $1,750 if they claim at age 62. If they wait until age 70, their benefit could increase to roughly $3,100 per month. Over a long retirement, that difference can add up to hundreds of thousands of dollars in additional benefits.
Takeaway: The best claiming age depends on your health, financial situation, employment status, and family circumstances. There is no one-size-fits-all approach.
Myth #2: Social Security Will Run Out of Money
One of the most common questions we receive is whether Social Security will still be around in the future.
The Reality: Social Security is not expected to disappear.
The program does face long-term funding challenges, and some changes will likely be needed in the future. While benefits could be reduced if no action is taken, it is unlikely that Social Security benefits will simply go away.
Current projections indicate the Social Security retirement trust fund could be depleted around 2032, at which point incoming payroll taxes would still cover an estimated 75% to 80% of scheduled benefits.
Takeaway: Social Security should remain part of your retirement plan, but relying on it as your only source of income may not be prudent.
Myth #3: Working While Receiving Social Security Always Reduces Your Benefits
Many people believe they cannot work after claiming Social Security.
The Reality: Before reaching Full Retirement Age, your benefit may be reduced if your earnings exceed certain limits. However, those benefits are not necessarily lost forever.
In 2026, $1 in benefits is withheld for every $2 earned above $24,480. Once you reach Full Retirement Age, those income limits no longer apply, and you can earn any amount without affecting your benefit.
At Full Retirement Age, your monthly benefit will be adjusted to account for the months in which benefits were withheld.
Takeaway: Working during retirement may have less impact on your benefits than you think, especially after reaching Full Retirement Age.
Myth #4: Social Security Benefits Are Never Taxable
Many retirees are surprised when taxes enter the picture.
The Reality: Depending on your income, a portion of your Social Security benefits may be subject to federal income tax.
In some cases, up to 85% of your benefits may be taxable. Under current law, at least 15% of Social Security benefits remain tax-free. It is also worth noting that while many states do not tax Social Security benefits, some do. Your state of residence can affect your overall tax picture as well.
Income from retirement accounts, pensions, employment, and investments can all affect how much of your benefit is taxable. The calculation is based on your Adjusted Gross Income (AGI), plus tax-exempt interest income, plus one-half of your Social Security benefits.
Example: If you receive $24,000 per year in Social Security and up to 85% becomes taxable, as much as $20,400 could be included in your taxable income. In some cases, careful tax planning can help reduce the amount of Social Security subject to tax.
Takeaway: Tax planning can play an important role in maximizing retirement income.
Myth #5: Married Couples Should Claim Independently Without Coordination
Many couples focus only on their individual benefits without considering how their decisions affect each other.
The Reality: Social Security includes valuable spousal and survivor benefit provisions that make a coordinated claiming strategy important for married couples.
A spouse who had lower lifetime earnings may be entitled to up to 50% of the higher earner's benefit at Full Retirement Age.
More significantly, when one spouse passes away, the surviving spouse keeps only the larger of the two benefits, not both.
Example: Suppose one spouse is entitled to $3,200 per month at age 70 and the other to $1,400. If both claim early, the higher benefit might be $2,400 and the lower $1,100. When the higher-earning spouse passes away, the survivor keeps only $2,400. But if the higher earner delays to age 70, the survivor benefit grows to $3,200. That is a difference of $800 per month, or nearly $10,000 per year, for potentially many years.
Takeaway: Married couples should evaluate claiming strategies together rather than making decisions independently. In many cases, having the higher earner delay as long as possible is one of the most valuable steps a couple can take to help provide more income for the surviving spouse.
Conclusion
Social Security decisions can have a lasting impact on your retirement income. While there is no one-size-fits-all claiming strategy, understanding the facts behind these common myths can help you make more informed decisions.
Before claiming benefits, consider how Social Security fits into your overall retirement income plan, tax strategy, and long-term goals.
Owen
Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor. This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.
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