Although Social Security is one of the most important entitlement programs in America, it’s also one of the most widely misunderstood, with the majority of people lacking some fundamental knowledge about how it works.

And not only do millions have knowledge gaps about their retirement benefits, but unfortunately, many also believe things that simply aren’t true. That can be a big problem if you’re making retirement decisions based on incorrect information or misconceptions, such as these three common Social Security myths.

Sad older man sitting alone at table.

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1. Social Security is going broke

Millions of Americans worry that Social Security benefits won’t be available to them by the time they hit retirement age, because they fear the benefits program is going broke. This is a misplaced fear, though, as Social Security cannot run out of money unless its source of revenue is changed (which isn’t likely to happen, even though President Trump has indicated he’s in support of modifying it).

Currently, Social Security gets the bulk of its income through payroll taxes. As long as people are working and the tax is being collected, the program will have money coming in. What could happen, though, is that Social Security’s trust fund might run out in 2035 and the program may only be able to pay benefits out of taxes being collected. This would necessitate a 24% cut to benefits if changes aren’t made — but retirees would still get most of what they were promised.

2. Social Security benefits will go up if you claim them early

Many seniors claim Social Security before their full retirement age (FRA) — which is between 66 and 67 — while operating under the erroneous belief they’ll get lower payments now but will see their benefits go up at FRA. Unfortunately, that’s not the way the program works.

If you claim benefits ahead of FRA, early filing penalties reduce the size of monthly checks by a small percentage for each month you’re early. The reduction in benefits adds up to a 6.7% decrease in your standard benefit for each of the first three years you’re early and an additional 5% for each year before that.

You won’t see this benefits reduction eliminated or reduced at full retirement age — your benefits and future raises will continue to be affected by your early claiming choice.

3. Social Security isn’t taxable

Finally, some current and future retirees misunderstand the amount of their Social Security they’ll get to keep because they assume no taxes will be due on retirement benefits. That’s also not going to be the case for millions of seniors, as up to 50% of retirees lose at least part of their benefits to the IRS.

Taxes start to kick in once your income hits $25,000 if you’re a single tax filer or $32,000 as a joint filer, and you could be taxed at your ordinary income tax rate on up to 50% of benefits. Once your income hits $34,000 as a single filer or $44,000 as a joint filer, up to 85% of your benefits become taxable. There are also 13 states where you could be subject to tax on part of your benefits as well.

Unfortunately, if you believe you’ll be able to keep your entire benefit or that you’ll get more money later after claiming early, you could end up with less income than you expect. On the other hand, if you incorrectly believe Social Security is going broke, the worst that’s likely to happen is that you’ll end up saving more money to avoid over-reliance on a benefits program that you aren’t sure will be there for you. Still, while that’s not a bad thing, it’s best to know the truth about Social Security so you can make retirement plans based on the reality you’re likely to face.

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