Five Common Myths About Social Security

By: David Stubblefield, CFP®, CDFA®
There’s no doubt about it—Social Security is an important and popular source of retirement income for most Americans. According to a recent AARP survey, it’s supported by more than 90% of the population and critical to older Americans’ financial health, with four out of five of those polled expecting to rely on Social Security during their later years.¹ 

Myths on Social Security
Of course, Social Security provides a cash benefit during your retirement years. But perhaps during your retirement planning process you discovered it’s a smaller portion of retirement income than what you likely expected or would need to live on through your later years. With that important piece of knowledge in hand, you probably focused on saving as much for retirement as possible by contributing to tax-deferred vehicles such as Individual Retirement Accounts (IRAs), 401(k)s, and employer-sponsored plans, as well as investing in stocks, bonds, mutual funds, and annuities. 

Yet many Americans, even those who are already retired and receiving benefits, still struggle with fully understanding how the Social Security system works. There are too many misconceptions about the program to tackle here, but hopefully we can provide some clarification around five of the most common myths. 

You're in Good Company

Let’s start at the beginning. It’s true when Social Security was created back in 1935, the age of 65 was established as the age of eligibility to draw full retirement benefits. Later on, the minimum eligibility age was lowered to 62 years so individuals could claim a reduced benefit. However, at that time 65 years remained the age for collecting full retirement benefits. 

But in 1983, in order to reduce Social Security costs, the government raised the full retirement age to 66. Currently this is the threshold for when workers qualify to file for 100% of the benefit based on their lifetime earnings history. Individuals born in 1954 reached that milestone in 2020.¹ 

Over the next five years the threshold increases by two months each year, settling at age 67 for those born in 1960 and beyond.

What is Your Full Retirement Age?


Contrary to popular belief, your Social Security account is not like a retirement savings account. The government doesn’t put your payroll tax contributions in a personal account for you to accrue interest and be paid out upon your retirement. In reality, your Social Security benefit is calculated on your earnings during your working years, not on the money you contributed to the program. Social Security is essentially a pay as you go system where current retiree benefits are paid by current payroll taxes.

According to AARP, Social Security equals about 40% of a beneficiary’s preretirement earnings. Calculations are weighted so benefits replace a higher percentage of income for lower-wage workers and a lower percentage of income for upper-income earners.¹
With all the focus on retirement benefits, it’s easy to overlook the fact that the program also offers protection against long-term disability. Once you receive retirement or disability benefits, your family members may be eligible to receive benefits too. 

Another valuable source of support for your family is Social Security survivor’s insurance. If you were to die, certain members of your family—including your spouse, children, and dependent parents—may be eligible for monthly survivor’s benefits to help replace lost income.

If you earn wages and take your social security benefit prior to full retirement age there are limits on to how much you can draw from social security based on your earnings. If you face this type of social security reduction based on earnings your social security benefit will be a little bigger later. You don’t permanently lose any benefits, they are “rearranged”. Once you reach full retirement age, you can earn as much as you want without affecting your benefit. If you are under full retirement age, $1 in benefits will be withheld for every $2 you earn under a certain annual limit. For 2021 that limit is $18,960.³ 
  • In the year you reach full retirement age, $1 in benefits will be withheld for every $3 you earn above a certain annual limit until the month you reach it. If you reach full retirement age in 2021, that limit is $50,520.³
  • There is no limit for workers who are full retirement age or older for the entire year.³
This was true until 1984—at that time the Social Security overhaul passed by Congress the previous year included a provision that made a portion of the benefit taxable depending on your income level. You pay federal income tax on up to 50% of your benefits if your annual income is $25,000 to $34,000 for an individual filer and $32,000 to $44,000 for a couple filing jointly. Above those thresholds, up to 85% of benefits are taxable.¹ 

Because the rules on state taxing vary widely, you should consult your tax advisor about any taxes you may owe on your Social Security income.

If your spouse worked and qualified for Social Security you are entitled to a spouse’s benefit up to half the amount of the working spouse’s benefit. In fact you can qualify for spousal benefits on an ex-spouse if you were married 10 years or longer. 

Regardless of whether you’re already retired or just starting to plan for this important milestone, it’s important to answer your questions about Social Security in the context of your broader retirement plan. Contact Commerce Trust Company today—we will answer your questions, evaluate or update your retirement plan, and discuss other income and cash flow options that can help supplement your benefits. 

¹ Andy Markowitz, AARP, “10 Social Security Myths That Refuse to Die,”, updated September 20, 2020.
² Rachel Hartman, “8 Myths About Social Security,”, U.S News & World Report, July 8, 2020.
³ Source: Social Security, “Cost of Living Adjustment (COLA) Information for 2021,”, accessed January 18, 2021.

The opinions and other information in the commentary are provided as of February 2, 2021. This summary is intended to provide general information only, and may be of value to the reader and audience. 

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such. 

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. 

Past performance is no guarantee of future results.

Diversification does not guarantee a profit or protect against all risk.

Commerce Trust Company is a division of Commerce Bank. 



David Stubblefield Commerce Trust Company
David Stubblefield, CFP®, CDFA™ Vice President, Senior Financial Planner Commerce Trust Company 
David is a financial planner with Commerce Trust Company. He is a member of the financial advisory services team, a dedicated financial planning practice within Commerce Trust that provides objective financial advice to clients.

Following a thorough assessment of a client’s unique situation and thoughts regarding wealth, David develops holistic and coordinated plans to help clients meet their short-term and long-term goals as well as take full advantage of various planning, tax, and investment strategies along the way.

His areas of focus includes planning for financial independence, retirement, divorce, executive compensation, estate preservation, and business succession. David joined Commerce in 1995 and has held positions in private banking, credit analysis, commercial business development, and retail sales.

David received his Bachelor of Science in business administration from Southeast Missouri State University. He holds both the CERTIFIED FINANCIAL PLANNER™ and Certified Divorce Financial Analyst™ designations. Additionally, David is a member of the Financial Planning Association and the Institute for Divorce Financial Analysts.