9 Confusing Things About Social Security Even Professionals Get Wrong

In theory, Social Security should be pretty simple: 6.2% of every one of your paychecks goes into the system, and later in life, when you retire, you can reap the rewards.

The Social Security Administration is not a small agency, either. It makes up almost 10% of the U.S. budget, clocking in just shy of $1.4 trillion. Only the Department of the Treasury, Department of Health and Human Services, and the Department of Defense are bigger.

Understanding Social Security is crucial when preparing for retirement. Here are nine confusing things about the federal program, including some facts even professionals get wrong.

First things first: What is Social Security? As the name implies, it's a financial safety net for Americans. More broadly, it includes multiple welfare and social insurance programs. 

The Social Security Act was enacted in 1935 and signed into law by President Franklin Delano Roosevelt.

As the Social Security Administration notes, before Social Security, many people faced destitution in old age. 

While its scope has expanded, including the Social Security Disability Benefits Reform Act of 1984, the goal is to give Americans an income in retirement.

You can apply for Social Security benefits at any point between age 62 and age 70. However, the Social Security Administration calls the decision "personal."

According to the agency, you need to ask yourself some questions. Key among them: Is it better to start benefits early with a smaller monthly amount for more years or wait for a larger payment over a shorter period?

At age 18, you can create a My Social Security account to track your contributions and estimate your future benefits. Your monthly Social Security payment depends on your birth year and when you start receiving benefits.

If you were born in 1960 or later, your full retirement age is 67. Claiming benefits early at 62 reduces your monthly amount by about 30%. For example, if your full benefit is $2,000, taking it at 62 lowers it to roughly $1,400. This reduction is usually permanent.

Delaying benefits beyond your full retirement age increases your monthly payment due to delayed retirement credits. For each year you wait past 67, your benefit grows by about 8%, up to age 70. That means if your full benefit is $2,000, waiting until 70 could increase it to approximately $2,480 — a 24% boost.

The Social Security Administration provides an online calculator to help estimate your benefit based on different claiming ages.

Don't expect a physical check after you apply for your benefits and the feds agree to send them your way. By law, your benefits have to be transferred electronically, specifically in two flavors.

You can have them sent into an existing bank account by direct deposit, or you can opt for a Direct Express Debit Mastercard. It will, of course, depend on your preferences.

You can still work while you retrieve Social Security benefits, but there will be financial issues. It comes down to Uncle Sam's math.

If you work, your payments might be temporarily lowered. Before reaching full retirement age, the SSA deducts $1 for every $2 you earn over the annual limit of $23,400 in 2025.

In the year you reach full retirement age, the reduction drops to $1 for every $3 earned above $62,160 in 2025. After you hit full retirement age, those withheld payments are restored, and there's no limit on earnings that would reduce your benefits.

Nobody wants to think about those end of days, but it's a question to consider when it comes to your partner. Will they get your benefits? Yes, if they qualify.

These are called Survivor benefits. They provide monthly benefits to eligible family members of people who contributed to Social Security taxes through their work before passing away. Of course, there are rules about how it works, so check with the SSA.

The Social Security Administration offers a cost-of-living adjustment (COLA) each year. In 2025, the adjustment was a 2.5% increase for all Social Security payments.

These automatic adjustments help seniors keep up with inflation. For example, in 2023, the increase was 8.7%, the highest COLA ever.

The age you decide to retire is, for obvious reasons, a personal one. By age 70, though, your benefit stops increasing. The SSA won't magically start sending you benefits when you turn 70. You have to apply.

If you decide to delay your retirement, the SSA suggests signing up for Medicare by the time you turn 65.

This will probably be a bummer, but yes, your premium is automatically deducted from your Social Security or Railroad Retirement Board benefit payment.

Medicare will send you a premium bill if you don't receive benefits from Social Security or the Railroad Retirement Board.

Retirement can be confusing and may be a bit frightening, especially if you need to supplement your income. As you approach retirement, you might want to talk to a financial planner to help you determine your retirement age.

An advisor can also help you allocate investments to ensure your savings and investments supplement your Social Security payments. This checkup may give you peace of mind that you're ready for a comfortable retirement.