Good Investments
that are Right for You

Myths And Facts About Social Security

social security

Myths And Facts About Social Security

Myth: Social Security will provide most of the income you need in retirement. 
Fact: It is likely that it will provide a smaller portion of retirement income than you expect.

There’s no doubt about it — Social Security is an important source of retirement income for most Americans. According to the Social Security Administration (SSA), nearly nine out of ten individuals age 65 and older receive Social Security benefits.¹

But it may be unwise to rely too heavily on Social Security, because to keep the system solvent, some changes will have to be made. The younger and wealthier you are, the more likely these changes will affect you.

Whether retirement is years away or just around the corner, keep in mind that Social Security was never meant to be the sole source of income for retirees. As President Dwight D. Eisenhower said,

“The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built.”

No matter what the future holds for Social Security, focus on saving as much for retirement as possible. When combined with your future Social Security benefits, your retirement savings and pension benefits can help ensure that you’ll have enough income to see you through retirement.

 

Myth: If you earn money after you retire, you’ll lose your Social Security benefit. 
Fact: Money you earn after you retire will only affect these benefits if you’re under full retirement age.

Once you reach full retirement age, you can earn as much as you want without affecting your Social Security retirement benefit. But if you’re under full retirement age, any income that you earn may affect the amount of benefit you receive.

  • If you’re under full retirement age, $1 in benefits will be withheld for every $2 you earn above a certain annual limit. For 2022, that limit is $19,560.
  • In the year you reach full retirement age, $1 in benefits will be withheld for every $3 you earn above a certain annual limit until the month you reach full retirement age. If you reach full retirement age in 2022, that limit is $51,960.

Even if your monthly benefit is reduced in the short term due to your earnings, you’ll receive a higher monthly benefit later. That’s because the SSA recalculates your benefit when you reach full retirement age and omits the months in which your benefit was reduced.

If You Were Born In…                                  Your Full Retirement Age Is…

1943 – 1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

If you were born on January 1st of any year, refer to the previous year to determine your full retirement age.

 

Myth: Social Security is only a retirement program.
Fact: It also offers disability and survivor benefits.

With all the focus on retirement benefits, it’s easy to overlook the fact that Social Security also offers protection against long-term disability. And when you receive retirement or disability benefits, your family members may be eligible to receive benefits, too.

Another valuable source of support for your family is Social Security survivor insurance. If you were to die, certain members of your family, including your spouse, children, and dependent parents, may be eligible for monthly survivor benefits that can help replace lost income.

For specific information about the benefits you and your family members may receive, visit the Social Security Administration website at ssa.gov, or call 800-772-1213 if you have questions.

 

Myth: Social Security benefits are not taxable.
Fact: You may have to pay taxes on these benefits if you have other income.

If the only income you had during the year was Social Security income, then your benefit generally isn’t taxable. But if you earned income during the year (either from a job or from self- employment) or had substantial investment income, then you might have to pay federal income tax on a portion of your benefit. Up to 85% of your benefit may be taxable, depending on your tax filing status (e.g., single, married filing jointly) and the total amount of income you have.

For more information on this subject, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

 

Myth: Social Security is going bankrupt soon.
Fact: It is facing significant financial challenges, but is not going bankrupt.

Social Security is largely a pay-as-you-go system with today’s workers (and employers) paying for today’s retirees through the collection of payroll (FICA) taxes. These taxes and other income are deposited in such trust funds and benefits are paid from them.

According to the SSA, due to demographic factors, Social Security is already paying out more money than it takes in. However, by drawing on the Old-Age and Survivors Insurance (OASI) Trust Fund, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until fund reserves are depleted in 2033. Once the trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 76% of scheduled benefits. So at that time, if no changes are made, beneficiaries may receive a benefit that is about 24% less than expected.²

 

1) Social Security Administration, Social Security Basic Facts, 2021

2) 2021 OASDI Trustees Report

Other Recent Articles

What Does A Strong Dollar Mean For The U.S. Economy?

Every year, the College Board releases new college cost data and trends in its annual report. The figures published are average cost figures based on a survey of approximately 4,000 colleges across the country.
college savings

College Cost Data: 2022-2023 School Year

Every year, the College Board releases new college cost data and trends in its annual report. The figures published are average cost figures based on a survey of approximately 4,000 colleges across the country.
tax

2022 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.
tax

2022 Year-End Tax Tips

Here are some things to consider as you weigh potential tax moves between now and the end of the year.
retirement planning through all stages of life

Retirement Plan Considerations at Different Stages of Life

Throughout your career, retirement planning will likely be one of the most important components of your overall financial plan. Whether you have just graduated and taken your first job, are starting a family, are enjoying your peak earning years, or are preparing to retire, your employer-sponsored retirement plan can play a key role in your financial strategies.

Medicaid And Nursing Home Care

As you enter your 60s and 70s, health may become more of an issue than it once was, and your thoughts may turn to the future. Who will take care of you when you can no longer care for yourself? If you must enter a nursing home, how will you pay for it? By learning as much as you can about Medicaid right now and planning appropriately, you may be able to resolve these issues and create a more secure future.