Debunking 4 Social Security & Retirement Myths

Established in 1935, Social Security is a public program with the goal of providing a source of income for retirees, as well as those who are unemployed, dependent survivors, or individuals with disabilities.  While the program has evolved over time, its core purpose remains the same.

With these changes, there are some persistent myths that we often hear, such as: Social Security will run out, I won’t get back what I put in, or it’s always best to claim later.

The reality is, an optimal Social Security claiming strategy can look different for every person, depending on their retirement goals. In this blog, we are going to address 4 common Social Security myths and explain the truth behind them to better inform and guide your personal plan.

Myth 1: I will never get back all the money I put into the program

This myth may have some truth to it, but it really depends on how long you live, and when you start collecting Social Security. For some people, you may in fact collect more than what you contributed to the system.

When you contribute to Social Security over the course of your working years, your money isn’t going into a specific account set aside just for you. Because it’s not as easily traceable as your 401(k) or other investment accounts, it may be easy to think you won’t ever see it in full again.

But the reality is, Social Security is an inflation-protected guaranteed stream of income that you will receive monthly, for life – even if you live to age 101 and beyond! If you’re married and you predecease your spouse, your spouse can also receive your benefits until their death – if your benefits are higher than theirs alone.

Myth 2: I can work for as long as I need to after I claim Social Security

This is another myth that is partially true. Technically, you can continue to work for as long as you wish while also receiving Social Security benefits. However, if you receive Social Security benefits before your full retirement age (FRA), while continuing to work, some of your benefits may be withheld.

For example, if you receive work earnings and Social Security before the year you reach FRA, $1 is withheld for every $2 you earn above $24,480 (2026).

In the year you reach FRA, $1 is withheld for every $3 earned above $65,160 until the month you reach FRA (2026). Once you reach FRA or older, you may keep all your benefits, no matter how much you earn from other work earnings.

If some of your monthly benefits are withheld because of your earnings, your monthly Social Security income will be increased permanently, starting at your FRA, to reflect the months that your benefit was reduced.

Making the decision on when to retire and when to start collecting Social Security is highly personal and unique and should be discussed with your spouse or partner, and a financial adviser.

Myth 3: If I claim early, I can get an increase once I reach full retirement age

There is a wide misconception that if you claim for Social Security early (at age 62), once you reach FRA (age 66 or 67), your benefits will increase. This is incorrect.

Once you’ve claimed your Social Security benefits, there is no increase in this amount. However, you can voluntarily ‘suspend’ benefits after you reach FRA and resume as late as age 70. If you do so, your annual benefits can increase by 8% per year of delay up until the age of 70.

And regardless of when you claim for Social Security, there is an annual cost of living adjustment, but this does not affect your base benefit.

Myth 4: My benefits are based only on my wages I’ve earned before age 65

Your Social Security benefits are based on your highest 35 years of inflation adjusted earning – which do not have to be consecutive years or before age 65.

This rule can be confusing since you only need a minimum of 10 years of employment (or 40 credits / $1,810 per credit) to be eligible for Social Security. So, if you are someone who doesn’t have 35 years’ worth of earnings, zeros will be included in your calculations.

Consider this example: a woman worked full-time for 12 years before leaving the workforce to be a full-time mom. Then, at age 65, she decided to get a part-time job at a bookstore.

While this income from the bookstore isn’t as much as her wage when she worked full-time, it is still included in her highest-earning 35 years and would be included in her benefits calculation whenever she claims Social Security.

The Bottom Line

There are many factors to consider when deciding when to start receiving Social Security benefits, such as if you have a pension, how long you plan to work before retiring, how long will your spouse or partner work, or do you have any dependents? A financial adviser can help evaluate your current situation and offer suggestions on the best time to claim Social Security, as well as when to retire to maximize your potential retirement earnings and tax efficiency. Click here to get connected with an adviser.

If you’d like to learn more about navigating Social Security strategies to maximize your benefits, register for our webinar. Click here to save your seat.