7 Facts Most People Get Wrong About Social Security

Social Security is a significant source of income for many retirees, but people often misunderstand even basic concepts behind this government program.

For the Nationwide Retirement Institute’s 2022 Social Security Survey, 1,853 adults age 26 and older were asked about their attitudes and knowledge regarding Social Security. It uncovered significant gaps in respondents’ understanding of the nation’s retirement program.

Here’s a look at a few of the facts that a majority of people get wrong about Social Security.

Work history

True or false: If you work less than 35 years, your benefit amount will be reduced.

Respondents who answered correctly: 38%

Fewer than 4 in 10 people knew this statement is true. While you don’t need to work 35 years to receive Social Security benefits, you do need to work that long to get the largest benefit amount possible.

That’s because your Social Security retirement benefit amount is based on your highest 35 years of earnings. If you worked fewer than 35 years, the government uses a zero for each year without earnings. Each zero lowers your benefit amount.

Early claiming and spousal benefits

True or false: If you claim early, any spousal benefits your partner is eligible for will be reduced.

Respondents who answered correctly: 35%

This statement is true. If you start your Social Security benefits early, you will receive a reduced amount and your husband’s or wife’s spousal benefits will also be reduced. The only exception is if your spouse is caring for a qualifying child.

Medicare sign-up

True or false: You can’t sign up for Medicare unless you are enrolled for Social Security.

Respondents who answered correctly: 34%

This statement is false. You don’t need to be enrolled in Social Security to receive Medicare. In fact, if you aren’t receiving Social Security benefits and fail to enroll in Medicare during your initial enrollment period at age 65, you could get hit with a hefty penalty.

We explain more in “4 Pitfalls for First-Time Medicare Enrollees.”

Undoing a claim

True or false: You can undo a claiming decision within 12 months.

Respondents who answered correctly: 32%

This is true. You can cancel your application for Social Security within 12 months if you change your mind. This is known as a withdrawal, and you’re allowed to do it once in your lifetime. It will require you to pay back any benefits received, but it might be worthwhile if you claimed early but then decided you wanted to wait until your full retirement age or beyond to beef up your monthly payments.

To learn more about the withdrawal process, check out “How to Undo Your Social Security Claim in 4 Steps.”

Inflation protection

True or false: Social Security is not protected against inflation.

Respondents who answered correctly: 32%

Only about one-third of respondents knew this statement is false. Social Security payments are, in fact, protected against inflation thanks to annual cost-of-living adjustments.

Also known as COLAs, these annual bumps in benefits are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is one of the federal government’s gauges of inflation. In 2022, Social Security beneficiaries received a 5.9% increase in benefits, the largest increase in decades. The COLA for 2023 is shaping up to be even bigger.

Wage base

True or false: Workers pay Social Security taxes on all of their income.

Respondents who answered correctly: 27%

False. There is a cap on how much of your earnings is subject to Social Security payroll taxes, but not many people seem to know that. Known as a contribution and base benefit, this cap is set at $147,000 for 2022. Anything earned above that amount is exempt from Social Security payroll taxes.

Claiming spousal benefits via an ex

True or false: You might be able to claim benefits on a former spouse’s earnings record if your spousal benefit is less than the amount you would receive based on your own record.

Respondents who answered correctly: 14%

A mere 14% of survey respondents knew this statement is false. It’s a little tricky, though.

You can receive spousal benefits based on an ex-spouse’s earnings record, but you have to meet certain criteria. One requirement is that the spousal benefit is greater than what you would receive based on your own record — not less than, as stated in the Nationwide survey. Tricky, right?