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Simply Money

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Here are 5 myths about Social Security that you should ignore.

1. Full Social Security benefits begin at age 65

In a sense, age 65 is to retirement what Kleenex is to tissue or ChapStick is to lip balm: Popular brands that became generic trademarks.

So, while it’s true that 65 is a number that a lot of people associate with retirement, unless you were born in 1937 (or before), that group doesn’t include the people who work at the Social Security administration.

In the eyes of the Social Security Administration, your full retirement age increases the later you were born during the last century. Folks born from 1943 until 1954 have a full retirement age of 66. And people born after 1960 won’t reach their full retirement age until they hit 67.

But all those dates are, in a way, moot. That’s because you can apply earlier (at age 62) or you can apply later (at age 70). And that’s because the age that you elect to apply for Social Security should also take into consideration both your personal financial situation and your life expectancy.

2. There are no taxes on Social Security

This is a common misperception. Depending on your total income, your Social Security can, in fact, be taxed.

What are the thresholds?

For single folks, taxation on Social Security benefits begin when your 'combined income' exceeds $25,000. For couples who file jointly, the magic number is when your combined income crosses the $32,000 mark. (And, for the sake of clarification, 'combined income' is the sum of your adjusted gross income, any non-taxable interest you earn, and half of your Social Security benefit.)

Speak to your advisor and your accountant to create a plan that allows you to keep as much of your money as possible. This usually involves designing a forward-thinking income distribution strategy. 

3. The annual Cost of Living Adjustment is promised

No. It. Isn’t.

The COLA, or Cost of Living Adjustment, is tied to changes in the prices of a select index of consumer goods. When the index shows an increase in these goods (as it did in 2021), then as a Social Security recipient, you can expect to receive a corresponding bump in your benefit amount.

But for years where there is no (or low) inflation, such as 2010, 2011, and 2016, there is no automatic COLA increase.

4. Social Security is really a personal retirement account

It isn’t.

The Social Security taxes that are deducted from your pay are not held in a personal fund with your name on it. Nor are they invested for you personally in an account that is accruing interest.

A confusing fact about Social Security is that your benefit amount isn’t really based upon how much you paid in, but on how much you earned over the course of your working life. 

And that is why, no matter how much you paid in, Social Security only provides (on average) about 40% of your pre-retirement income.

5. Your ex-spouse applying for benefits on your work history decreases your total benefit amount

It doesn’t.

While it’s true that if you are divorced your ex could be eligible to receive Social Security based on your earnings, payments to an ex have absolutely no impact on your benefit amount, and, in fact, you won’t even know (unless they tell you) that they are receiving those benefits.

Conversely, the reverse is also true. If your ex-spouse was the higher earner, you may be able to receive an increased benefit based on their earnings history.


Without getting “journalistically yellow,” it’s no overstatement to say that Social Security is increasingly complex. Which is why we work with clients to create holistic investment and retirement plans that consider the possibility of future legislative (increased taxation, means testing, delayed benefits) changes to the program.

Simply, if you save and plan well, should changes come to Social Security, even radical changes, the impact on your retirement and your quality of life should be minimal. 

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