Why It Matters:
- Social Security affects your retirement income – understanding how it works can help you make the most of your future benefits.
- Recent rule changes and Social Security funding debates could impact your future benefits, so it’s important to stay informed.
- Whether you’re 25 or 55, knowing the facts about Social Security can help you make smarter saving and investing decisions today.
Social Security remains a key source of income for many Americans, providing benefits for retirees, disabled individuals, and survivors. While this government program has been around for nearly 90 years,1 it’s still a benefit that’s often misunderstood. Understanding how Social Security works can help you maximize your benefits and better plan for your financial future. Here, we bust some myths and help you get the facts about Social Security.
Myth: Social Security is tax-free
Whether you’re planning ahead or already enjoying your retirement, it’s important to understand the tax implications of your Social Security benefits. Start by creating and logging in to your “my Social Security” account at https://www.ssa.gov/myaccount/ to get an idea of what you can expect to receive in monthly Social Security retirement benefits. You may very well see a decent-looking number. Before you get too attached to that number, however, bear in mind that you may not end up receiving the entire amount of your benefit. If you have alternate sources of income, such as wages, self-employment, dividends, and other taxable income, your benefit may be taxable.2 In addition, how you’re taxed depends on whether you file as an individual or as a couple.2 Keep this in mind as you calculate your retirement budget so you can prepare accordingly.
Myth: Social Security won’t be there for me
This widely held mantra is popular, but inaccurate. Numbers don’t lie, and they tell a different story. Social Security’s accounting shows the agency will be able to continue paying full benefits from its trust fund (a kind of savings account) until 2033. After that, it will be taking in less than it pays out but will still be able to fund 83% of benefits.3 A lot can happen between now and 2033. The best thing you can do is to stay informed and adjust your plans as needed.
Myth: Quick, you’re 62, time to claim Social Security
The idea of “maximizing” Social Security benefits has likely come up in conversations about planning for retirement. But the fact is, until someone invents a test to determine exactly how long you’ll live, there’s no way to identify “maximum” benefits. There are pros and cons to filing early and later, but it comes down to personal choice and your unique situation. If you choose to claim early at 62, you’ll receive less in benefits each month, but probably for many more months depending on how long you live. If you wait until your full retirement age to claim (it depends on the year you were born, but for most people, it’s 67), you’ll receive your full monthly benefits. On the other hand, if you claim later at 70, you’ll receive a higher monthly benefit, but it could be for less time. Keep in mind that once you make this decision, it’s permanent – you can’t change it once you start receiving benefits. There’s really no “best age” to claim your benefits. However, making this decision may be a great time to include your financial professional in the discussion. They can help you determine the time that’s right for you and your retirement goals.4
Myth: Everyone is entitled to Social Security
Not exactly. Social Security is pay for play. Unless you’re disabled, all Americans need to have 40 credits to qualify for benefits. Those credits are earned gradually while earning income. For example, in 2025, workers earn one credit for each $1,810 in covered earnings per year, with a maximum of four credits per year. So, $7,240 in covered earnings generates the yearly maximum of four credits. And even then, some workers won’t qualify. For example, you wouldn’t qualify if you contributed to a government or railroad retirement program instead of Social Security.5,6
Myth: Medicare is free
Just like Social Security, Medicare requires you to have a record of earned wages. Medicare primarily consists of three key parts: A, B, and D. Part A covers hospital costs for qualified recipients over 65 for free. Part B covers doctor visits and other medical services at a cost of about $185 a month for most people, and depending on your earnings in retirement, that premium can go as high as $628.90 a month. Part D is available to those who have Parts A and B and want help covering prescription costs. Keep in mind, Medicare doesn’t cover all medical expenses and unless you have additional coverage, you’ll likely be responsible for premiums, deductibles, and copays. It’s important to understand the full benefits and costs of Medicare before you need them so you can accurately budget for them as part of your retirement plan. Want a plan that fills the gaps? Read up on Medigap plans, they’ll cost you more but can help cover costs not included in Parts A, B, and D.7,8
Myth: When a spouse passes, the survivor gets that benefit too
Well … sort of. If a higher earning spouse dies, his or her survivor can claim that higher retirement benefit. But if that survivor is also collecting Social Security, they’ll get a “combined” benefit that’s equal to the higher amount, not both benefits (theirs and their deceased spouse’s). The survivor might get a “raise” by collecting the higher benefit, but total household income will decrease because Social Security doesn’t continue sending two separate checks. Unfortunately, property taxes, cable TV, landscaper, and HOA costs don’t decrease because one less person lives in the household. That’s why it’s important to explore alternate sources of income such as annuities and investments.9
Myth: When a spouse passes, Social Security provides for final expenses
Not really. A surviving spouse is entitled to a payment of $255, an amount that hasn’t changed since 1954. That’s it. Trust us, that will not cover final expenses. You may want to work with your financial professional to explore additional options to help cover final expenses.9
Myth: You must visit a Social Security office and wait in a long line for help
Au contraire mon frère (if you’ll pardon our French). Social Security is getting better at providing services online. From checking anticipated benefits at SSA.gov/myaccount to filing for benefits, even requesting a replacement Social Security card (in most states).10
Things to Consider:
- If you haven’t done so already, consider registering at SSA.gov/myaccount for a custom report on your anticipated benefit, based on your actual earnings.
- Start researching how Medicare may work for you to help cover your healthcare costs.
- Talk with a financial professional to get an idea of how Social Security might fit into your total retirement income picture, along with other sources of income you might have, such as a 401(k), IRA, or other personal savings and investments.
1 “Social Security FAQs,” SSA.gov, accessed January 2025
2 “Income Taxes and Your Social Security Benefit,” SSA.gov, accessed January 2025
3 “Summary: Actuarial Status of the Social Security Trust Funds,” SSA.gov, May 2024
4 “When to Start Receiving Retirement Benefits,” SSA.gov, accessed January 2025
5 “Social Security Credits,” SSA.gov, accessed January 2025
6 “How You Earn Credits,” SSA.gov, January 2025
7 “How does Medicare work?” Medicare.gov, accessed February 2025
8 “2025 Medicare Parts A & B Premiums and Deductibles,” CMS.gov, November 2024
9 “Survivors Benefits,” SSA.gov, January 2024
10 “Online Services,” SSA.gov, accessed February 2025
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
