5 Social Security Myths That Could Hurt You

Key Points

• There has been a dramatic rise in the number of people claiming Social Security earlier than expected.

• Fewer adults entering the workforce means less money collected in Social Security taxes.

• In 2023, Social Security benefits prevented 16.3 million seniors from living below the poverty line.

• The $23,760 Social Security bonus most retirees completely overlook ›

Since the 1930s, the U.S. has sought ways to make life easier for senior citizens. This has included introducing programs like Social Security, senior housing, Medicare, and food assistance. Despite being around for nearly 100 years, there are still myths surrounding these programs, especially Social Security.

Here are five of the most common Social Security myths:

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1. Myth: Since Social Security is sure to go bust, you must collect benefits early

Reality: According to the Urban Institute, field office closures at the Social Security Administration (SSA) have made people nervous enough to file for Social Security benefits earlier than expected. In fact, it may be anxiety that has driven first-time Social Security claims up 13% compared with one year ago.

By April of this year, 276,000 retirees had claimed Social Security benefits, a move SSA calls a "dramatic" rise. While there are plenty of other reasons a person may claim benefits early (including illness and job loss), experts say that anxiety appears to play a meaningful role in why so many are opting to claim smaller checks rather than waiting to max out their benefits.

The Social Security trust fund is indeed expected to be depleted in 2033. No matter how scary that may sound, the situation is not without hope. In 1983, the fund was just months away from being emptied, and Congress was forced to devise a solution to put the program back on a stable footing for decades. It is within Congress's power to shore the program up once again.

While collecting Social Security benefits earlier than anticipated may seem like the best way to get as much as you can from the system before it goes broke, it ignores the fact that the vast majority of retirees depend on Social Security, and few politicians want to face the public outrage cuts are likely to cause. It also overlooks the fact that claiming Social Security early permanently reduces your benefit amount.

2. Myth: Baby Boomers are the reason Social Security faces a shortage

Reality: Back in 1983, when Congress made the changes needed to strengthen Social Security, no one could imagine how dramatically the U.S. birth rate would drop over four decades. In 1983, the birthrate was 73.2 births per 1,000 women. By 2024, that number had dropped to 54.6 births per 1,000 women.

The drop in live births led to a dramatic decrease in the number of working adults. Benefits are paid to current retirees from the Social Security taxes paid by still-working adults, and the fewer working adults, the fewer people who pay Social Security taxes.

While it may be tempting to believe Boomers are the reason for SSA shortages, the reality has more to do with fewer workers to fill the Social Security coffers.

3. Myth: Most Social Security benefits are so low that they don't have much impact

Reality: The average check is just north of $2,000, or $24,000 per year (those who claim spousal benefits typically bring in 50% of this amount). If you can't imagine living on $24,000 annually, you may wonder how much Social Security benefits impact a person's life.

In 2023 alone, Social Security prevented 16.3 million Americans 65 and older from living below the poverty line, reports the Center on Budget and Policy Priorities. Cost-of-living-adjustments (COLAs) are certainly welcomed, but do little more than help those who rely on Social Security keep pace with inflation. Even with Social Security benefits, plus COLAs, 10.1% of seniors still live in poverty. However, the poverty rate for seniors would be 37.3% without benefits.

4. Myth: Social Security adds to the deficit

Reality: Social Security payments have nothing to do with the U.S. deficit. The program is self-funded, primarily by the Federal Insurance Contributions Act (FICA). The FICA rate for Social Security is 12.4%, with an employer and employee each paying half. Interest on the Social Security trust fund reserves and taxation of benefits add more funds to the program.

5. Myth: There's no hope of receiving full Social Security benefits

Realty: It is within Congressional power to find a solution to potential Social Security shortages. Here are some of the more common ideas floated:

• Raise the payroll tax rate
• Eliminate the taxable minimum
• Begin taxing employer-sponsored health insurance and fringe benefits
• Invest a percentage of the Social Security trust in stocks
• Bring employees currently not covered by the Social Security system (like state and local government employees) into the program, thereby bringing in more Social Security taxes
• Gradually increase the full retirement age (FRA)
• Reduce retirement benefits for high earners

Any solution enacted by Congress is likely to involve a combination of techniques, but it can be accomplished with bipartisan cooperation.

Understanding the difference between Social Security myths and reality is essential. Knowing the truth offers the tools you need to make decisions that benefit you in the long term and can prevent you from falling for one of the many Social Security scams aimed at seniors.

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