• A Summary of the 2026 Annual Reports – Social Security and Medicare Boards of Trustees (SSA.gov)
• 2026 Social Security Trustees Report Insights: Jason Fichtner (401(k) Specialist)
• Cole, Suozzi Introduce Bipartisan Social Security Commission Act (U.S. House of Representatives)
• Senators Introduce Bipartisan Proposal to Encourage Congressional Action on Social Security (U.S. Senate)
• Your Retirement Benefit: How It’s Determined (SSA.gov)
• Retirees Spend Lifetime Income, Not Savings (Blanchett & Finke, Financial Planning Review)
• Tax Deductions for Working Americans and Seniors (IRS.gov)
• Who Can Get Family (Spousal) Benefits (SSA.gov)

7 Social Security Myths That Could Change When You Claim

Last week, we explored why waiting until 70 to claim Social Security can make sense on paper, but still deserves a closer look in your own plan. 

We talked about how your health, your savings, and even your comfort with spending can shape that decision, and why claiming earlier can be a reasonable choice, even if you can afford to wait. 

But weighing those tradeoffs depends on understanding how Social Security works, and a few common assumptions can get in the way. 

For example, could you stop working in your 50s and still qualify for the maximum benefit? 

If you’ve already claimed early, can you still increase your check? 

And what do the program’s financial challenges actually mean for the benefits you’re counting on? 

The answers can change how you approach the decision we covered last week, along with your tax planning and your retirement income. 

So today, I’m building on that conversation. I’ll walk you through seven common Social Security myths, where the confusion comes from, and what you need to know to make informed choices, whether you’re still years away from claiming or already collecting.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you stay wealthy in retirement. Ok, onto today’s episode.

Myth #1: “Social Security Is Going Broke, So Claim as Early as You Can”

Let’s start with the one we hear most often.

The first myth is that Social Security is going broke, and for that reason, the smart move is to claim as early as possible.

Jason Fichtner, who previously served as acting deputy commissioner of the Social Security Administration, recently called this the single biggest misconception Americans have about the program. As he put it, “It will be there for you. The question is in what form.”

To see why, and to understand what Jason means, it helps to know where the money sits.

For decades, Social Security collected more in payroll taxes than it paid out in benefits. By law, those surplus dollars were invested in special U.S. Treasury bonds that earn interest, and those bonds are what make up the Social Security trust fund. 

Now, you may have seen articles or headlines saying that the government “raided” the trust fund, or is about to raid it, and that language can create the impression that the money was simply taken and is gone. But that’s not how the trust fund works. 

Yes, Washington uses the cash from those past Social Security surpluses as part of its overall financing, but it does so in exchange for Treasury bonds that the government is legally obligated to repay with interest. It’s quite similar to how your local bank can use the money in customer checking accounts or money invested in CDs to make loans and other investments. The money is put to work, but the bank still owes the depositor. In the same basic way, the Social Security trust fund holds Treasury bonds—not empty promises—and those bonds can be redeemed to help pay benefits.

The real challenge is that Social Security now pays out more than it collects, so it’s true that it’s drawing down the trust fund. Social Security’s trustees publish a report on the system’s finances every year, and in the latest one, released this past June, they project that the trust fund for retirement benefits will run out of reserves in late 2032, about six years from now.

But as referenced in last week’s episode, running out of reserves isn’t the same as running out of money. Workers will keep paying payroll taxes. And because Social Security can’t borrow on its own, if Congress did absolutely nothing, benefits would automatically drop to what those taxes can cover. And right now, that’s projected to be roughly 78% of what’s been promised.

Let’s put some numbers to this. If your benefit were $3,000 a month, a 22% cut would bring it down to a little over $2,300. Sure, no one would welcome that kind of reduction from a system they spent decades contributing to, but it’s a long way from zero.

And while I don’t have a crystal ball, history does suggest that Congress is unlikely to let it come to that. Some of you history buffs may remember that in 1983, Social Security was within months of being unable to pay full benefits on time, and in response, Congress passed a reform package with large bipartisan majorities. Among other changes, it also raised the full retirement age from 65 to 67, which was phased in gradually over the following decades.

Fast forward to today, and we’re starting to see some early movement again. This summer, bipartisan groups in both the House and the Senate introduced bills that would set up a formal process, including a commission, to develop a plan and push it to a vote.

That said, a fix may not come quickly. In fact, Fichtner puts the odds of Congress acting in the next two years at “slim to none.” But he also sees the chance of checks simply not going out as very small

As for what form the changes might take, he notes that most recent reform plans protect current retirees and people nearing retirement from outright benefit cuts. Still, that doesn’t mean their benefits would be unaffected. One common idea being discussed, for example, would slow the growth of annual cost-of-living adjustments. In other words, your benefit could continue to increase each year, but those increases would be smaller, leaving you with less income over time than under the current rules. 

Other proposals would primarily affect younger workers or higher earners. Those include raising the full retirement age, increasing the amount of wages subject to Social Security payroll taxes, or taxing a larger share of benefits for high-income retirees. 

The uncertainty can understandably make claiming early feel like the safest move. But possible reforms are only one part of that decision. Your health, income needs, and broader retirement plan matter, too. 

If claiming as early as possible at 62 fits your needs, goals, and circumstances, it can certainly be a valid choice. The key is understanding why it works for you, so a headline doesn’t end up driving a decision that affects the rest of your retirement. 

And making that choice starts with understanding how Social Security determines what you’ll receive. That’s where the second myth comes in.

Myth #2: “Your Benefit Is Based on Your Final Working Years”

The second myth is that Social Security bases your benefit on your final years of work, so retiring early and waiting to claim will shrink your check.

And it’s easy to see where this one comes from. Many traditional pensions calculate your benefit using your last few years of salary, so it’s natural to assume Social Security works the same way.

But Social Security looks at your entire career. Specifically, it builds your benefit from your highest 35 years of earnings, whenever those years happened.

As a quick example, imagine you started working at 22 and retired at 60. That’s 38 years of earnings on your record. So even if you wait until 67 to claim, the years without a paycheck never enter the calculation – Social Security simply uses your best 35 of the 38.

Take a more extreme case. Let’s say someone earns enough to max out the Social Security payroll tax for 35 straight years, then stops working entirely in their mid-50s. At full retirement age, they would still qualify for the maximum benefit, or come very close to it.

Now, gaps in your work history can still matter. If you have fewer than 35 years of earnings covered by Social Security, the formula fills in the missing years with zeros. Working longer can replace those zeros, or replace a lower-earning year with a higher one, but once you have 35 years, stopping work doesn’t erase those earnings or automatically add zeros to your calculation.

On top of that, those early paychecks may count for a lot more than you think. Your salary from your 20s and 30s might look small today, but Social Security adjusts every year of earnings before age 60 to reflect how much average wages have grown since then. That helps put earnings from decades ago on more equal footing with your recent pay.

For example, in 1985, the median U.S. household income was about $24,000, according to the Census Bureau. If you earned that amount in a job covered by Social Security and you turn 62 this year, those past earnings would count as nearly $100,000 in your benefit calculation, thanks to adjustments for wage growth. In other words, even your earliest paychecks may still be shaping the size of your benefit today. 

So, before you decide to work a few extra years just to increase your Social Security, log into your account at ssa.gov. Review your earnings history for accuracy, then compare your benefit estimate with and without future earnings. Keep the claiming age the same in both versions so you can see how much continuing to work would actually add to your monthly check. That will give you a clearer number to weigh against the time you’d spend working.

And once you have a good understanding of your earnings history, the next step is to look at how Social Security turns those earnings into a monthly benefit.

Myth #3: “You Get Back What You Put In” (Or Almost Nothing, If You’re a High Earner)

The third myth comes in two versions that sound like opposites, but both come from misunderstanding how your benefit is calculated.

Some people expect their Social Security benefit to be directly proportional to what they paid in. That’s version one.

Others, especially high earners, assume they’ll get very little back despite decades of paying the maximum payroll tax. That’s version two.

To see why neither assumption is quite right, it helps to picture a set of tax brackets running in reverse.

You see, on your tax return, higher slices of income are taxed at higher rates. But Social Security works in reverse: as your earnings rise, each additional dollar adds less to your benefit. So higher earners generally receive larger checks, but those checks cover a smaller share of what they used to earn.

Here’s how that works. Social Security takes your average monthly earnings from your highest 35 years, after adjusting for wage growth, and splits that average into three slices. It then replaces 90% of the first slice, 32% of the second, and 15% of the third.

To put that into dollars, let’s use Tom and Sally as an example. Tom’s earnings after that adjustment, averaged $60,000 per year. Sally’s earnings averaged $120,000 a year. 

Using the formula for someone turning 62 this year, Tom’s benefit at full retirement age would be a little over $2,300 a month, while Sally would receive a little over $3,500.

So, even though Sally earned twice as much as Tom, her benefit is only about 50% larger. That’s still a meaningful monthly check, but because it replaces less of their previous income, she’ll likely need to cover more of her retirement spending from other sources.

Now, even knowing that, you might still be thinking, “But Taylor, I’ve paid the maximum payroll tax for 30 years. Will I ever get that money back?” 

To put that concern in perspective, the maximum benefit for someone claiming Social Security at full retirement age this year is just over $4,100 a month, or nearly $50,000 a year. At that rate, 25 years of payments would add up to more than $1 million, before any cost-of-living adjustments. And for a couple who both qualify for the maximum, their combined benefits could approach $100,000 a year. 

Of course, that might raise another question: could you have done better investing those payroll taxes yourself? Possibly, but a fair comparison also needs to account for the protections Social Security provides. Your payments continue for as long as you live, include cost-of-living adjustments to help keep up with inflation, and may provide benefits for your spouse, including after your death.

There’s a behavioral piece to consider here, too. Think about the money you put into buying a home. Once you factor in interest, taxes, maintenance, and transaction costs, it may not deliver the highest investment return. In fact, historically, the long-term return on residential real estate in the U.S. hasn’t been very attractive. However, paying down your mortgage builds equity, and accessing that money generally requires selling the house or borrowing against it. 

That’s why homeownership is often described as a form of forced savings: it creates a routine for building wealth and makes that money harder to spend. The connection to Social Security is that doing better on your own would require more than choosing good investments. You’d also need to the discipline and patience to consistently invest those dollars in a prudent investment plan and leave them alone for decades, which dozens of behavioral finance studies have proven that isn’t easy for most people to do.

But even if you did have the discipline and invested consistently, you’d still face the uncertainty of how long your money needs to last. That’s where Social Security’s role as insurance becomes especially valuable. If you live well into your 90s, those monthly payments continue, even as your savings need to stretch further than you expected.

And once you view it that way, the claiming decision becomes about more than simply how quickly you can collect what you paid in, which brings us to the fourth myth.

Myth #4: “There’s One Best Age to Claim”

The fourth myth is that there’s one best age to claim Social Security.

In my experience, people tend to fall into two camps. Some are so eager to get their money that they claim at 62 without running the numbers. Others focus so heavily on getting the biggest check that they assume waiting until 70 is always best. 

And to be fair to the wait-until-70 camp, the math is real. If your full retirement age is 67, claiming at 62 permanently reduces your monthly benefit by 30%. 

Delaying past 67 increases it by 8% per year, giving you a 24% larger benefit at 70. That means your check at 70 would be about 77% larger than at 62, with inflation adjustments continuing for the rest of your life. 

But whether delaying actually produces more money overall depends on how long you live. A simple comparison puts the break-even age around 80 – that’s when the larger checks from waiting begin to outweigh the eight years of payments you passed up. 

So delaying offers more protection against outliving your money, while claiming earlier gives you more time to collect benefits. But that trade-off involves more than a break-even age. 

As we discussed in last week’s episode, waiting also means covering more of your spending from savings, often early in retirement when a market downturn can do the most damage. Those withdrawals can also leave you with less flexibility down the road. Money in your portfolio is available for a surprise expense. Social Security provides steady income, but you can’t request an advance when you need a new roof. And even that comparison is incomplete without considering taxes, which many break-even charts leave out.

There’s also the question of how comfortable you feel spending your money. It’s well documented that retirees spend about 80% of their guaranteed income, but less than half of what their portfolios could safely support. So, for some, a regular Social Security check makes it easier to spend and enjoy their healthiest years.

That’s another reason to look beyond the size of the check and consider how claiming fits into your overall retirement plan. The timing can affect your tax bracket, opportunities for Roth conversions, future required distributions, and even Medicare premiums. Those effects help determine how much you actually have available to spend. 

And if you’re married, that planning needs to account for both spouses. When one spouse dies, the survivor generally keeps the larger Social Security benefit, while the smaller one ends. With that in mind, some couples choose to start the smaller benefit earlier and delay the larger one. That gives them some income now and a larger monthly check for whichever spouse lives longer.

So whether you’re leaning toward 62 or 70, be careful about letting one consideration decide for you. The right claiming age depends on how these moving parts and personal preferences fit together. And whatever age you choose, it’s easy to assume there’s no going back. 

Myth #5: “Claiming Early Locks You In for Good”

That brings us to myth number five: claiming early locks you into a smaller check, and any benefits withheld along the way are gone for good. 

This concern usually comes up in two situations. The first is when someone claims early and continues working. 

You see, before full retirement age, Social Security limits how much you can earn without having benefits withheld. In 2026, that limit is about $24,480, with $1 withheld for every $2 earned above it. 

In the year you reach full retirement age, the limit rises to about $65,160, with $1 withheld for every $3 above it. Only earnings before the month you reach full retirement age count toward that higher limit. 

These rules are known as the earnings test, but not all income counts. The test applies to wages and self-employment income, so your IRA withdrawals, pension, and investment income don’t affect it. 

And those withheld benefits don’t simply disappear. At full retirement age, Social Security adjusts your monthly benefit to account for the months it withheld payments and you receive that adjustment through larger monthly checks going forward. Still, if you expect to earn well above the limit, waiting to claim your benefit may make sense. Once you reach full retirement age, you can earn any amount without having benefits withheld. 

The second situation is a change of heart. Maybe you claimed at 62, but your circumstances changed, and you wish you had waited. 

Even then, you have options. Once you reach full retirement age, you can ask Social Security to pause your payments. During that pause, your benefit grows 8% per year until age 70. Just know that the delayed retirement credits earned during a pause are credited monthly, so a person who suspends for part of a year would receive a prorated increase, not necessarily a full 8%.

As a quick example, pausing from 67 to 70 would increase your benefit by 24%, plus any cost-of-living adjustments. That won’t fully erase the reduction from claiming early, but it can increase your monthly income for the rest of your life. Just keep in mind that voluntary suspension generally pauses benefits paid to family members on your record as well, such as a current spouse or eligible child. 

Lastly, if you change your mind within 12 months after your benefits begin, you have another option: you may be able to withdraw your application—subject to Social Security’s approval—and repay all benefits paid based on your record, including benefits paid to family members. In this scenario, Social Security treats the original claim as if it had never been filed. Just know you can only use this option once.

Myth #6: “Social Security Isn’t Taxed”

Now, once your checks start arriving, there’s still the matter of how much of each one you get to keep, which brings us to myth number six.

The sixth myth is that Social Security is not taxed, or that the new tax law made it tax-free.

AsI covered way back in episode 172, most states don’t tax Social Security. But at the federal level, it’s a different story.

To determine how much of your benefit is taxable, the IRS uses something called combined income. That’s your adjusted gross income before Social Security, plus half of your Social Security benefits, plus any tax-exempt interest—such as interest from municipal bonds. 

For married couples filing jointly, combined income between $32,000 and $44,000 can cause up to 50% of benefits taxable. Above $44,000, that can rise to 85%. And in case you’re wondering, for single filers, those thresholds are $25,000 and $34,000. 

To be extra clear, that doesn’t mean you pay an 85% tax rate – it means up to 85% of your benefit is included in your income and taxed at your ordinary federal income-tax rates. 

 

For example, say a married couple takes $60,000 in fully taxable IRA withdrawals and receives $40,000 in Social Security. Following the IRS definition, their “combined income” is $60,000 from the IRA withdrawal plus half their Social Security benefits, for a total of $80,000. 

In this example, they reach the maximum taxable share of 85%. That means $34,000 of their Social Security is included in their income, while the remaining $6,000 is free from federal tax. 

So where does the new tax law fit in? Despite headlines suggesting otherwise, the One Big Beautiful Bill Act didn’t change how Social Security benefits are taxed. Instead, it created an additional deduction of up to $6,000 per eligible person age 65 or older, available from 2025 through 2028. 

The deduction starts shrinking once modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married couples filing jointly, and while it can reduce your tax bill, the rules we just covered still apply. 

But even under those rules, Social Security can be a tax-friendly source of retirement income since at least 15% of your benefit stays free from federal tax and up to 100% may avoid state taxes depending on where you live. 

By comparison, withdrawals from a traditional IRA funded entirely with pretax dollars are fully taxable. And that difference can create meaningful planning opportunities. 

For some retirees with large IRAs, starting Social Security and reducing IRA withdrawals can lower their overall tax bill and leave more room for Roth conversions. 

But waiting can create opportunities, too. If you cover expenses with cash or carefully managed brokerage withdrawals while delaying benefits, you may be able to keep taxable income lower and create room for even larger conversions.

Which approach works better depends on how your benefits fit with the rest of your financial plan and retirement income strategy.

Myth #7: “No Work Record, No Benefit”

So far, everything we’ve covered has focused mostly on benefits you earn through your own work. But you may also qualify through a spouse, which brings us to our seventh and final myth: which is that you can’t receive a benefit unless you’ve earned one yourself. 

Spousal benefits exist to provide valuable protection for people who spent years raising kids, caring for a parent, or supporting a spouse’s career. Here’s how they work. 

If you’re 62 or older and have been married for at least a year, you may qualify for benefits based on your spouse’s work record, even if you’ve never earned a paycheck yourself. This spousal benefit can bring your total monthly payment up to half of your spouse’s full retirement age benefit. 

To qualify for that maximum, though, you must wait until your own full retirement age to claim. Starting earlier reduces the amount, and your spouse ]must be collecting benefits before you can begin.

Having a benefit of your own doesn’t necessarily rule you out, either. In that scenario, Social Security pays your benefit first, then adds a spousal amount if you qualify for more. So, you may receive an increase, but you won’t collect both benefits in full. 

These protections can also extend to people who are divorced. If your marriage lasted at least 10 years, you’re currently unmarried, and you’re at least 62, you may qualify based on your ex-spouse’s record. The benefit must exceed your own, and the same maximum applies: up to 50% of your ex’s full retirement age benefit, with a reduction if you claim early. 

One difference here is that you may not need to wait for your ex to start collecting. In fact, if you’ve been divorced for at least two years, you can claim once your ex is at least 62 and eligible for retirement benefits, even if they haven’t filed. 

Understandably, some people hesitate because they worry their claim will take money away from their ex. But that’s not true – it won’t reduce their benefit or their current spouse’s benefit, and you don’t need their permission to apply. 

That also means your ex’s decision to remarry doesn’t disqualify you. For these benefits, it’s your own marital status that matters. That distinction changes somewhat with survivor benefits, which follow separate rules. For example, remarrying at 60 or older generally won’t prevent you from collecting on a deceased former spouse’s record. But we’ll save those details for another episode.

The Bottom Line

Last week, we focused on the tradeoffs of when to claim. Today was about the rules those tradeoffs depend on.

And if there’s a common thread running through these myths, it’s that Social Security tends to be sturdier, more flexible, and more connected to the rest of your plan than many people assume.

That’s why it helps to look at your benefit alongside everything else. Where will your spending money come from while you wait to claim? If you’re married, what would your spouse receive if you passed away first? And if you’re already collecting, is there still a lever worth pulling?

I don’t believe there’s one right answer for everyone. But the clearer your picture of the rules, the easier it becomes to find the answer that fits your life.

Thank you, as always, for listening, and to view the research and resources referenced in today’s episode, just head over to youstaywealthy.com/305

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.