Apr 10, 2025
Considering that Social Security accounts for most (if not all) of many retirees’ income, it makes sense to learn as much about it as possible.
But according to Nationwide Mutual Insurance, there are big knowledge gaps in Americans’ understanding of the federal program, and a lot of misperceptions.
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What’s more, Nationwide’s 2024 Social Security survey revealed a lack of knowledge across all demographics — from Gen Z through Boomers.
Tina Ambrozy, Nationwide’s senior vice president of Strategic Customer Solutions, warns that ignorance could cost Americans big time.
"It is now more important than ever for them to have a retirement plan that hedges against the possibility of receiving less in benefits than expected," she said.
Here are five myths about Social Security that could put your financial future at risk.
1. Social Security won’t be reduced in my lifetime. (FALSE)
The Social Security Administration is considering big cuts to benefits in 2035 based on current projections. The cuts could reduce monthly benefits by upwards of 20% or more — impacting all Americans, including those currently aged 55 to 65 who are nearing retirement.
Yet when MassLife Insurance surveyed this very age group last year, 42% were unaware of this future threat.
Time will tell if Congress will take major action to save Social Security, but given projections, you can’t rely on it as your sole source of retirement income. Consider alternatives to supplement your retirement income.
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2. There’s no way my ex can claim Social Security based on my work record. (FALSE)
Based on your work record, your ex can make a claim for spousal Social Security benefits if you were married 10 years or more. Your ex may be entitled to a monthly benefit calculated at 50% of your own. The good news is that your ex's claim won't reduce your own Social Security benefits, or that of your current spouse.
Your ex-wife can start collecting spousal Security Security at full retirement age. When you die, she may also qualify for collecting benefits at higher widow’s rates.
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Still, many Americans seem to be unaware of this. In the MassLife survey, 41% of the respondents didn’t know they could collect Social Security based on their ex-spouse's Social Security earnings history. This misperception could cost exes who didn’t realize they could make a claim.
3. Social Security benefits are tax free. (FALSE)
This is a very common misconception. In fact, 50% of the respondents to Nationwide’s survey believed their Social Security benefits would not be taxed. Nevertheless, 40% of Americans pay taxes on the Social Security benefits.
If your gross income (Social Security plus additional income) is:
- $25,000 to $34,000 as an individual, or $32,000 to $42,000 if you’re filing jointly, up to 50% of your benefits can be taxed.
- More than $34,000 as an individual or more than $44,000 as a couple, up to 85% of your benefits can be taxed.
This may affect retirees who earn significant investment dividends as well as older adults who continue working after retirement age. Check in with a financial advisor or tax professional about tax implications as you plan your retirement finances.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
4. You get more money if you start Social Security early. (FALSE)
You may think that taking Social Security early will net you more because you’re collecting benefits longer, but it’s not true. While you can claim benefits when you’re 62, you'll receive a lower monthly payment for life.
More specifically, you may only be paid around 70% of your overall benefit amount. Waiting until the full retirement age (66 or 67 depending on the year you’re born) will get you full benefits.
Those who can wait until age 70 could receive a higher paycheck, though it may not be worth it depending on your financial situation. Talk to a financial advisor about your unique situation.
5. Participation in Social Security is voluntary. (FALSE)
It’s not an opt-out situation because funding for Social Security comes from tax revenue, and all working Americans must pay for the program through their payroll taxes.
This myth may have originated when President Franklin Roosevelt set up the program. At that time, there were jobs that were covered by the program and others that were not. Those working in jobs that were not covered didn’t have to pay the payroll taxes that funded the program — but they also didn’t get the benefits, either. Now everyone has to pay.
It pays to know about Social Security. (TRUE)
In the case of Social Security, as with all retirement planning, what you don’t know can hurt you.
Talking to a financial adviser can help you avoid costly mistakes so that you can maximize your Social Security benefits in retirement.
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Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
