The Big Lie Baby Boomers Were Sold About Social Security

When you think about Social Security, it won’t be as surprising to learn there is a gap in myths versus realities. Some of these differences are generational, as it’s clear that baby boomers, the generation most dependent on Social Security, are often unclear on what exactly this program is, how it works, and how it will benefit them.

Most concerning is the apparent misconception about the program’s sustainability. The constant fearmongering on the news has created a myth that Social Security will run out of money before Boomers can take advantage of benefits. For this reason, we want to look at some of the myths and realities of this critically important program.

Misconception #1: Social Security Is Running Out of Money

It is important to start any conversation about Social Security around the misconception benefits will disappear in the next few years. First and foremost, Social Security is one of the biggest aspects of our federal budget, so there is funding, but there are concerns that funding could see a shortfall in the next decade.

The Old-Age and Survivors Insurance (OASI) trust fund is projected to deplete by 2032 according to updated baseline estimates from the Congressional Budget Office. After this depletion, incoming payroll tax revenues are projected to cover only 72% to 77% of scheduled benefits unless legislative reform is enacted.

Congress unquestionably needs to agree on the best way to fund the program in the future. However, the origin of this concern no doubt stems from lots of talking heads coming onto weekend talk shows and explaining how Social Security will run out of money if their side of the aisle doesn’t get agreement from the other.

To be clear, this misconception is more about politics than reality. While it is true that your benefit amount can go up or down, so long as Americans pay taxes, Social Security can sustain itself for baby boomers and future generations. Considering Social Security benefits bring at least 16.5 million Americans above the official poverty line, funding remains critical.

Misconception #2: You Can Only Get Benefits at Age 65

Another common misconception is that there is only one retirement age and that you cannot receive benefits before this age. The reality is that there is no exact “right” retirement age and that you can start claiming benefits at different points. The origin of this misconception is likely just word of mouth. Someone who didn’t know the right information told someone else, and it quickly became a game of telephone.

To be clear, your retirement age will differ from someone else’s, which means you will draw Social Security at a different point. If you want to work until you’re 70, go ahead, as you’ll receive more monthly.

Adding to this misconception is that when the program was started in 1935, 65 was chosen as the initial eligibility threshold, an age requirement heavily influenced by late-19th-century German social insurance models under Otto von Bismarck. This landmark age baseline was later lowered to age 62 for early retirement benefits, a flexibility tool that remains a cornerstone of the system today.

Misconception #3: Social Security Will Fully Fund Your Retirement

When you start to draw on Social Security, far too many baby boomers believe that it can and will fully fund a retirement. The reality is that how much you draw from the program is based on how much you earn while working. In other words, you shouldn’t think of Social Security as saving for retirement; it is more about a way to benefit from all the years you have worked to aid your standard of living while retired.

Yes, baby boomers can earn more if they hold off taking benefits until they turn 70. However, Social Security isn’t exempt from taxes, so it won’t be as much money as you imagined, and it’s best combined with other income sources, such as a 401K.

This misconception also dates back to 1935, when the program was established to provide those suffering from the Great Depression with what they needed to survive. However, in the mid-1970s, concerns over the cost of increasing benefits began to shift the mindset.

Maximizing Benefits: Wait Longer

Myths aside, if you truly want to maximize your Social Security benefits, one of the best ways to do so is to wait a little longer. Instead of drawing your benefits at 62, a financial advisor will tell you that if you wait until 70, your benefits increase by 8% for every year you delay.

For citizens born in 1960 or later, the Full Retirement Age is 67. If you choose to delay claiming until age 70, you compound three years of delayed retirement credits at 8% annually, resulting in a maximum monthly benefit increase of 24% over your baseline amount. This structural adjustment translates into hundreds of extra dollars per month and thousands of dollars in guaranteed annual retirement income.

The Advanced Play: Mitigating Tax Drag and the IRMAA Trap

While delaying your benefit distribution until age 70 locks in your maximum monthly payment, it simultaneously increases your Modified Adjusted Gross Income (MAGI) during retirement. Without a proactive strategy, this elevated income floor can inadvertently push retirees into higher Income-Related Monthly Adjustment Amount (IRMAA) brackets, which drastically increases out-of-pocket premiums for Medicare Part B and Part D. To insulate your nest egg from this secondary tax drag, modern wealth management requires building tax-diversified retirement assets. High earners and independent professionals can counter this by executing a Mega Backdoor Roth strategy or maximizing post-tax contributions during their peak working years. By establishing a substantial pool of tax-free Roth capital, you can selectively draw tax-free distributions to supplement your maximized Social Security check, successfully keeping your baseline MAGI beneath punitive federal surcharge thresholds.

Maximize Benefits: Work More

One of the first things any financial advisor will tell you about maximizing your Social Security benefits is to optimize your career longevity. The Social Security Administration determines your primary insurance amount by applying an average wage index to your lifetime earnings, specifically averaging your top 35 highest-earning years.

If your formal work history spans fewer than 35 years, the calculation automatically plugs in zero-dollar entries for those empty spaces, which severely drags down your ultimate monthly payout. For individuals carrying career gaps, working additional years later in life—even through part-time consulting or secondary ventures—allows you to replace those early-career low numbers or zero-dollar entries with higher modern earnings, permanently lifting your baseline benefit.

Maximize Benefits: Claiming Spousal Benefits

Any financial advisor familiar with retirement planning will tell you that one method to maximize Social Security is to claim spousal benefits. In other words, if one spouse has earnings much less than their spouse’s, the best option might be to claim spousal benefits, which could be as much as 50% more for the higher-earning spouse when they hit their full retirement age.

The best part is that even if a spouse has no working history, they can still claim eligibility for spousal benefits. The only caveat is that both spouses must wait until the higher-earning spouse claims benefits to make an additional claim for spousal benefits. Even though these benefits can be claimed at age 62, waiting until 67 or 70 would maximize the payout.

It’s also worth noting that a surviving spouse can claim 100% of a deceased spouse’s benefits if the dead spouse has already reached full retirement age.

Preparing for Social Security Shortfalls

According to Merill Lynch, 60% of 18-44-year-olds believe Social Security will still exist by the time they retire, which bodes well for the program. However, you should never rely entirely on Social Security, especially with the understanding that there could be potential shortfalls sometime in the next decade.

Because of this concern, you should start saving as early as possible. It would be best to take advantage of the first employer offering you a 401k. The same consideration applies to Baby Boomers, who should rely on savings from a 401K to make up for any potential Social Security shortfalls.

Financial advisors may also recommend that you consider an annuity investment, which can provide a guaranteed income stream to supplement any shortfall from Social Security. Depending on the type of annuity, there are various levels of risk, so a financial advisor will help you consider your individual goals, risk tolerance, and liquidity needs that may stem from Social Security shortfalls.

Editor’s Note: This article has been updated to reflect the Congressional Budget Office’s accelerated 2032 baseline projection for the OASI trust fund depletion and corrected to establish the full retirement age at sixty-seven with a maximum twenty-four percent delayed retirement credit. Additional revisions include historical details regarding the German origins of the age sixty-five baseline, an explanation of the primary insurance amount wage-indexing calculation, and a new section covering the mitigation of Medicare premium surcharges through tax diversification and Roth funding strategies.