Don’t Lose Sleep Over These Social Security Myths

So it makes sense that the possibility of dwindling Social Security funds has many Americans worried. But let’s put some myths to rest.

Myth: Social Security is going broke.
Reality: Not really. It’s absolutely got funding challenges, but as long as there are workers, it will continue to collect tax revenue and pay benefits … though there may be benefit cuts if action is not taken to boost the system.

Myth: Social Security is partly to blame for the federal deficit. 
Reality: Nope. Social Security has its own dedicated revenue stream. In fact, it currently enjoys a $2.9 trillion surplus. The program is not allowed to borrow money to make payouts.

Myth: Social Security is going bankrupt. 
Reality: Anything is possible, but this one is pretty improbable. Nearly all (97%) of its income comes from the contributions of workers and employers, including interest on these contributions.

So it’s highly likely that Social Security will exist in some form when you’re ready to collect, and your best move now is to figure out an ideal Social Security strategy for you. Start with your marital status, Vanguard advises, and, depending on your personal financial situation, decide when it’s best to start claiming benefits.

For more on Social Security, read Money reporter Mary Ellen Cagnassola’s story.

— Jill Cornfield, deputy editor

Starting in 2026, retirement savers age 50 and older will have to make their 401(k) catch-up contributions as Roth contributions if they earn $145,000 during the year. It’s all due to a piece of legislation passed last year called SECURE 2.0. Originally, the change would have eliminated the tax break starting in 2024, but in late August, the IRS announced it would delay this change for two years. So next year and in 2025, you will still be able to make pre-tax catch-up contributions, no matter how much you earn.

• A retired elder law attorney details the retirement hobbies he’s tried — like knot-tying — so you don’t have to.
• If a gradual transition to post-work life sounds appealing, the “Tapas Life,” or taking little tastes of different aspects of retirement life, may be right for you. (podcast)
• Three-quarters of people age 50 and older worry Social Security will run out of money in their lifetimes.

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