3 Social Security Myths That Are Costing Retirees Money Right Now

Most people think a high income is the key to a large Social Security benefit. While there's definitely truth in this, it's not the full story. Your Social Security checks depend on your choices as much as your income history.

Unfortunately, there are a lot of costly myths that cause people to miss out on bigger benefits. Here are three of the most common, along with the truths behind them.

Image source: Getty Images.

1. You need to claim Social Security now before the program goes broke

The latest Social Security Trustees Report, which revealed that the program's trust funds would be depleted by 2032, has some people worried they won't get any benefits if they don't sign up soon. While the situation isn't great, it's fortunately not that dire.

Once Social Security's trust funds are depleted, it could face a 22% benefit cut, unless the government intervenes. It will likely help keep Social Security sustainable, though that may involve raising taxes on workers and/or seniors.

If you rush into claiming Social Security now and you're under your full retirement age (FRA) -- 67 for most people -- you'll shrink your benefits by up to 30%. That reduction is usually permanent, and it can result in a smaller lifetime benefit for many seniors.

We can't be sure what Social Security will look like beyond 2032. But those who apply for benefits early will almost certainly get less per month than those who delay their claim, just as they do now. Claiming early could still be the right choice for you if you have a short life expectancy or no other way to cover your living costs in the short term. But if neither of those things applies, holding out for larger checks might still be your best move.

2. Your Social Security claiming age only affects you

Your Social Security claiming age may only affect you if you're single and have no dependents. But that's not the case for many seniors. Married couples and those with minor or disabled children, or even aging parents who depend on their incomes, have to consider how their benefits will affect their family members.

Married couples who don't coordinate their claiming strategy may miss out on opportunities to increase their household benefits. For example, if one person has significantly outearned the other, the lower earner could apply for their own retirement benefit first. This extra money might enable the higher earner to delay benefits until their FRA, or even until 70, when they'll qualify for the largest possible checks. Then, when the higher earner applies for Social Security, the lower earner can switch to a spousal benefit if it's worth more than what they're receiving now.

Your claiming age also affects the survivor benefits your family members are eligible for after you die. The earlier you apply, the smaller these benefits will be. That's why some people choose not to claim Social Security at all while they're alive, especially if they expect their surviving family members to be heavily dependent on these checks.

Ensure you discuss your Social Security claiming strategy with any family members who may be affected, especially your spouse. And keep each other in the loop if one of you changes their mind about when you'd like to apply.

3. Your Social Security benefits are all yours

You may not get to keep all the Social Security benefits you earn, which is important to know when planning your retirement budget. The federal government taxes up to 85% of your benefits, depending on your provisional income. This is your adjusted gross income (AGI), plus any nontaxable interest from municipal bonds, and half your annual Social Security benefit.

For some, this leads to thousands of dollars in additional income taxes. You could also owe state benefit taxes, depending on where you live.

Early claimers could lose money to the Social Security earnings test as well. This withholds money from your checks if you're earning more than a certain amount from your job while under your FRA. This money comes back as a benefit boost once you reach your FRA, but it could cost you entire checks in the short term.

Budget for these challenges if you think you'll encounter them, or consider altering your claiming strategy to minimize them. For example, if you're under your FRA and are worried about the earnings test, delay your benefit application if you don't need your checks now to avoid this issue.

The Motley Fool has a disclosure policy.