Retirement Social Security

8 Things Gen X Doesn't Understand About Social Security

Replace your misconceptions about how Social Security works with these eight crucial facts before you reach retirement age.

By Michelle Smith

Edited by Lauren Wellbank

Updated March 27, 2025

If you're a member of Gen X, or the generation of people born between 1965 and 1980, your retirement deadline is fast approaching.

That means you've reached the right age to start thinking about financial strategies that will set you up for a stress-free retirement — including making the most of your Social Security benefits.

However, the ins and outs of Social Security can get a little complicated. Keep reading to learn more about some of the common misconceptions many Gen Xers have surrounding Social Security that can keep them from planning a successful retirement.

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The Social Security program really isn't running out of money

Rumors that the Social Security program is running out of money have been around for years, but as long as workers continue to pay into the system, the program truly can't run out of funds.

In fact, Social Security has had a surplus of funds for decades. In 2023, it was still operating with a surplus of nearly $2.8 trillion.

That said, with so many baby boomers transitioning out of the workforce, future generations might see their benefits start to decrease, with AARP estimating that future retirees could receive just 83% of their full benefit amount.

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You could end up paying federal taxes on at least some of your Social Security benefits

If your total annual income is below $25,000 as an individual or $32,000 as a married couple filing taxes jointly, you won't have to pay taxes on your Social Security benefits. However, if you earn more than that, you'll likely pay taxes on between 50% and 85% of your total annual benefit amount.

Some states impose an additional state-specific Social Security tax

Not all states tax Social Security income, but a handful do, including Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Vermont, Utah, and West Virginia.

Contact a local tax professional to learn more about your state's tax code, including which percentage of your benefits could be taxed and at what rate.

And if your state does tax Social Security income, be sure to account for that extra expense in your retirement plan.

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You won't receive your full Social Security benefits amount until at least age 67

Regardless of when you actually leave the workforce, the government bases your full retirement age — the age at which you're eligible to start collecting Social Security benefits — on your birth year.

For instance, individuals born in 1958 reach their full retirement age at age 66 and 8 months, those born in 1959 at age 66 and 10 months, and those born in 1960 at age 67.

This means the oldest Gen Xers won't be able to claim their full benefit amount for at least a few months after their 67th birthdays.

Claiming Social Security early permanently reduces your benefit amount

Technically, you don't have to wait until your full retirement age to start receiving benefits. You can apply for them as early as age 62.

However, doing so results in a permanent reduction in the amount of money you receive each month to ensure the amount you're entitled to will last for the rest of your lifetime.

You should apply for benefits four months before you want to receive them

It can take up to four months for the Social Security Administration to process your claim for benefits.

Even if you've applied for benefits, don't start accounting for them in your budget right away.

If you know your Social Security check will be essential to your bottom line, make sure to time your application right so you aren't left hanging when your paycheck dries up.

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You can keep working while receiving Social Security benefits

Although Social Security benefits are meant to help tide you over in retirement, you don't have to actually be retired to start receiving them.

However, if you start taking benefits before your full retirement age, you'll be subject to an earnings reduction, meaning every dollar you earn over a certain amount reduces your total benefits check.

These wages will also be subject to Social Security taxes, which can be a little confusing. But, as soon as you reach your full retirement age, your income will no longer reduce your benefits, and you'll receive the full benefit amount no matter how much you earn from other revenue sources, including a full-time job.

Divorce doesn't change spousal benefits

Spouses of workers who pay into Social Security are entitled to apply for Social Security based on how much their spouse (or former spouse) earned.

And if you've remarried after your divorce, your current spouse can still claim and receive spousal benefits even if your ex is also receiving spousal benefits based on your time together.

Bottom line

Making the most of your Social Security benefit is the ideal way to keep more cash in your wallet once you retire — but you'll only be able to put Social Security to good use if you understand it.

If you're still confused about your personal Social Security benefits, consider booking an appointment with a financial counselor or retirement planner.

They can take a direct look at your finances to help you craft a retirement budget that accounts for your expected Social Security benefit.

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