Social Security might seem straightforward at first: 6.2% of every paycheck you earn goes into the system, and when you retire, you can start receiving benefits.
The Social Security Administration (SSA) isn’t small—it accounts for nearly 10% of the U.S. budget, totaling around $1.4 trillion.
Only the Department of the Treasury, the Department of Health and Human Services, and the Department of Defense handle larger budgets.
Understanding how Social Security works is important when planning for retirement. Here are nine confusing facts about the program that even some experts get wrong:
1. What Is Social Security?
Social Security is a financial safety net for Americans. It includes several welfare and social insurance programs.
The Social Security Act was signed into law by President Franklin Delano Roosevelt in 1935. Before Social Security, many elderly Americans faced poverty.
Over time, the program has expanded, including the Social Security Disability Benefits Reform Act of 1984. Its main goal is to provide income during retirement.
2. When Can I Start Receiving Benefits?
You can apply for Social Security benefits between the ages of 62 and 70. The SSA calls it a personal decision.
If you start early at 62, you’ll receive smaller monthly payments for a longer period. If you wait until later, you’ll get larger monthly payments over a shorter period.
3. How Can I Estimate My Benefits?
At 18, you can create a My Social Security account to track your contributions and estimate future benefits.
Your monthly payment depends on your birth year and the age you start claiming. If you were born in 1960 or later, your full retirement age is 67.
Taking benefits at 62 reduces your payment by about 30%. For example, if your full benefit is $2,000, claiming at 62 would reduce it to $1,400.
Delaying benefits after your full retirement age increases your payment. For every year you wait past 67, your benefit grows by about 8% until age 70. That could increase a $2,000 benefit to roughly $2,480 — a 24% boost.
The SSA offers an online calculator to estimate your benefits based on different claiming ages.
4. How Are Benefits Paid?
Social Security benefits are paid electronically.
You can choose to have the money deposited into your bank account via direct deposit or loaded onto a Direct Express Debit Mastercard.
5. Can I Work and Receive Benefits?
You can still work while receiving Social Security, but your benefits might be reduced if you haven’t reached full retirement age.
Before full retirement age, the SSA deducts $1 from your benefit for every $2 earned above $23,400 in 2025.
In the year you reach full retirement age, the reduction drops to $1 for every $3 earned over $62,160 in 2025.
After reaching full retirement age, there’s no earnings limit, and withheld payments are restored.
6. Will My Spouse Get My Benefits If I Die?
If you die, your spouse may be eligible for survivor benefits if they qualify.
Survivor benefits provide monthly payments to eligible family members of workers who paid Social Security taxes.
The SSA has specific rules for how this works, so it’s important to check with them directly.
7. Do Social Security Payments Change Each Year?
Yes, Social Security payments adjust each year based on inflation.
In 2025, the cost-of-living adjustment (COLA) was 2.5%. In 2023, it was 8.7% — the highest ever. These adjustments help seniors keep up with rising costs.
8. Is There a Deadline to Start Benefits?
You don’t have to start Social Security at a specific age, but your benefit stops growing at 70. The SSA won’t start payments automatically — you need to apply.
Even if you delay Social Security, the SSA recommends signing up for Medicare by 65 to avoid penalties.
9. Are Medicare Part B Premiums Deducted From My Social Security?
Yes, Medicare Part B premiums are automatically deducted from your Social Security payment.
If you don’t receive Social Security benefits, Medicare will bill you for the premium separately.
Bottom Line
Retirement planning can be complicated and stressful, especially if you need to supplement your Social Security income.
A financial advisor can help you decide when to retire and how to balance your savings and investments with Social Security benefits.
Planning can give you confidence and peace of mind as you prepare for retirement.
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