Social Security pays benefits to roughly 68 million Americans, and as of August 2024, the average retired worker collected about $1,920 per month or around $23,000 per year.

With almost 90% of Americans aged 65 and over receiving Social Security as of June 2024, there’s a good chance that you’ll collect benefits once you’re old enough to be eligible. For this reason, it’s important to understand how Social Security works.

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Still, there’s a world of misinformation about Social Security and some of the most common lies could be messing with your retirement plans. Here are some of the biggest lies you need to be aware of and how to side-step them.

1. You can live well in retirement on Social Security alone

It’s not uncommon to see your living expenses drop in retirement. You’re no longer commuting to work every day at that point, and you may have a paid-off mortgage.

But you may aim to replace about 70% to 80% of your pre-retirement paycheck during your senior years. And Social Security alone won’t let you do that.

The Social Security Administration says that on average, the monthly benefits it pays replace 40% of workers’ pre-retirement income. But it also cautions that this can vary based on individual circumstances. If you’re a higher-than-average earner, you may be looking at even less replacement income from Social Security.

That’s why it’s a bad idea to plan to retire on Social Security alone. A better bet is to contribute to a retirement savings plan during your working years so you have a nest egg to fall back on.

2. Social Security is going bankrupt

You may have heard rumors that Social Security is running out of money and will soon stop paying benefits to retirees. The program is indeed facing some financial challenges that lawmakers need to address. But it’s not true that Social Security is on the verge of bankruptcy.

Social Security’s primary source of funding is payroll taxes — taxes workers pay on their earnings. Because of this, it’s nearly impossible for the program to run out of money. Right now, the worst-case scenario on the table is benefit cuts, and even those may be avoidable if lawmakers come up with a fix (which they’ve done when Social Security faced cuts in the past).

For this reason, don’t write off Social Security for your retirement. But just in case, plan for potential cuts by boosting your savings plan contributions.

Read more: These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes.

3. You can’t claim Social Security if you never worked

The way Social Security works is that you earn retirement benefits by paying into the program during your working years. But it’s possible to collect spousal benefits even if you never worked. You can claim spousal benefits if you’re married to someone eligible for Social Security, or if you’re divorced from someone entitled to benefits and your marriage lasted at least 10 years.

Your spousal benefit won’t be as large as the benefit received by your current or former spouse. The maximum spousal benefit you can collect is 50% of your spouse’s benefit at their full retirement age. And if you file for spousal benefits before your full retirement age, that payment will be reduced. If you want your full spousal benefit, make sure to find out your full retirement age so you know when to claim it.

4. You’re guaranteed Social Security as long as you worked

Working and paying into Social Security is your ticket to earning retirement benefits. But you need to meet certain requirements to be eligible for benefits later in life.

Specifically, you must accumulate 40 work credits in your lifetime to collect Social Security. And the maximum number of credits you can collect in a single year is four.

You should also know that the value of a single work credit can change from year to year. Currently, $1,730 in earnings gets you one work credit, but that number is likely to increase in line with inflation and wage growth. Pay attention to the value of work credits if you work very part-time but want benefits later on.

5. The longer you delay your Social Security claim, the more money you get

You’re entitled to your full monthly Social Security benefit based on your individual wage history once you reach full retirement age. That age hinges on your year of birth. If you were born in 1957 or earlier, you’re already eligible. The full retirement age gradually increases from 66 to 67 from 1955 to 1960. For those born in 1960 or later, benefits kick in at 67.

You can grow your monthly Social Security benefit by 8% for each year you delay your claim past full retirement age. But there’s a limit as to how long that strategy works.

Once you turn 70, you can no longer accrue the delayed retirement credits that result in boosted benefits. So it doesn’t pay to delay Social Security indefinitely. Holding off may just cost you income.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.