Five Social Security Myths

Myth #1 - Social Security is going to go broke

• In recent years, more money has gone out in benefits than has come in. If Congress fails to raise taxes or cut benefits, or both, the trust fund is estimated to run out of money in 2035. Yet, that doesn't mean benefits will disappear altogether. Payroll taxes will still be enough to cover about 80% of promised benefits. Will a 20% reduction really happen? Not likely. Congress is expected to find a solution long before 2035 (i.e., increase full retirement age, increase payroll tax, increase benefits tax). As long as payroll taxes exist, Social Security will never go broke, and Social Security is considered an obligation of general revenues as a result of the 1983 amendment.

Myth #2 – Social Security is like a retirement savings account

• The government does not put your payroll tax contributions in a personal “lock box” for you, to be paid out with interest when you retire. Benefits are based on your 35 highest-earning years, not on how much you paid into the system. Your contributions fund benefits for current retirees. When you retire, those still working will cover your benefits, and so on.

Myth #3 – My benefit won’t help me that much in retirement

• Social Security provides the majority of income to most retirees. For about half of this group, it provides at least 50 percent of their income, and for about 1 in 4, it provides at least 90 percent of their income, according to multiple surveys and the Census Bureau.  Everyone's situation is different, but if you live a long time, you may collect more than you contributed to the system.

Myth #4 – You lose benefits permanently if you keep working

• It's true that Social Security beneficiaries younger than full retirement age who keep working lose $1 in benefits for every $2 they earn, assuming they earn more than $19,560 in 2022. But this rule, known as the earnings test, is adjusted in the year you reach full retirement age. In that year, you give up $1 for every $3 you earn over a much larger cap—$51,960 in 2022. Then, starting in the month of your birthday during the year of full retirement age, there's no limit on how much you can earn. More importantly, Social Security will adjust your benefits going forward with the goal of insuring that over your life expectancy you'll be repaid all the money you “lost” to the earnings test.

Myth #5: An ex-spouse's benefits come out of your own

• Your former spouse may be eligible to collect Social Security benefits on your earnings record up to 50 percent of the benefit amount you are entitled to at full retirement age.  However, those ex-spouse benefits don't reduce your Social Security benefits. They have no effect on what you receive each month, even if both a current and a former spouse are collecting benefits based on your record.