Myths and misperceptions keep circulating about Social Security, making it challenging to decipher what is real and what’s false. As more and more baby boomers become eligible for their retirement benefits, these myths are worth debunking.

While there are plenty of things that you should know about Social Security, read on to discover the truth behind five of the most common myths.

Myth #1: Social Security Will Go Away Before You Do

The federal government has announced that Social Security may become insolvent between 2033 and 2037 if no action is taken – but Congress will likely act on the program’s behalf. Social Security provides 40% of the total income of the 40 million Americans receiving retirement benefits.

Did you know that Social Security has had a surplus each year since 1984? That situation is about to change. By about 2020, the program is projected to face a deficit, which will tap incoming interest payments to offset the shortfall. It will only be able to use that tactic until the mid-2030s. The program will not “run dry” or go bankrupt at that point, but by some estimate, its payments to retirees could become about 25% smaller.

Myth #2: Your Social Security Benefits Are “Your” Money

It would be a fitting reward if your Social Security income represented the return of all the payroll taxes you had paid through the years. Unfortunately, that is not the case. The payroll taxes you paid decades ago funded the Social Security benefits that went to retirees at that time. Your Social Security benefits will be funded by the payroll taxes that a younger generation pays.

Myth #3: Social Security Income is Tax-Free

When Social Security first started, the benefits were not taxable income. However, this changed in 1983 when Congress authorized its taxation. Now, up to 85% of your Social Security income may be taxed. Social Security uses this formula to determine the taxable amount:

Adjusted Gross Income + Nontaxable Interest + One-Half of Your Social Security Benefit = Your Combined Income

Single filers with combined incomes between $25,000-$34,000 and joint filers with combined incomes between $32,000-$44,000 may have as much as 50% of their benefits taxed. Single filers with combined incomes above $34,000 and joint filers with combined incomes above $44,000 may have up to 85% of their benefits subject to taxation.

Myth #4: If You Have Never Worked, You Will Never Get Social Security Benefits

This is not necessarily true.

Generally speaking, you have to work at least 10 years to become eligible for Social Security benefits. That is, you must spend 10 or more years at jobs in which you pay Social Security taxes; you must pay into the system to get something back from the system. Unfortunately, caregiving and child-rearing do not qualify you for Social Security.

To get technical about it, you must accumulate 40 “credits” to become eligible for benefits. When you receive $1,260 in earned income, you get one credit. Another $1,260 in earned income brings you another credit, and so forth. You can receive up to four credits per year. Most people will collect their 40 credits in a decade, though others will take longer.

If you have never worked or worked for less than 10 years, you could still qualify for Social Security on the earnings record of your spouse, your ex-spouse, or your late spouse. For example, a widow can choose to collect up to 100% of a deceased spouse’s monthly benefit and a married spouse can collect up to 50% of the other spouse’s monthly benefit. If you’re divorced, you may still file for Social Security benefits based on your ex-spouse’s earnings record as long as the marriage lasted 10 years or longer and you have not married again.

Myth #5: I Should Delay Filing for Social Security Until Age 70

While you can choose to file for Social Security at age 62, you will receive a larger benefit if you wait until age 67 or 70. While this seems like a great idea for some, it doesn’t make sense for everyone. The two biggest factors to consider when deciding when to start taking your Social Security benefits are if you’re single and if you have health issues.

If you are still earning a high wage and do not need the additional income, it might be a good idea to hold off for as long as you can before taking Social Security income. However, if you need the income, you should file as soon as you’re eligible.

If you have health issues, you likely should file for Social Security as soon as you’re eligible. Health issues may keep you from working, and it’s a good idea to have Social Security income to help you with your living expenses.

You may also want to do a cost-benefit analysis to see how much you will earn from Social Security, and if it makes sense for you to start collecting your benefit before the age of 70.

The Bottom Line

There are plenty of myths circulating about Social Security, most of which are dedicated to its scarcity. However, although Social Security will likely last much longer than what myths tell us, it is still wise to partner with a financial advisor to help you prepare for a successful retirement.

At Navalign Wealth Partners, we are dedicated to helping you strategize your finances, build wealth, and retire with confidence. Contact us today to take the next step on your wealth management path.