9 Social Security Assumptions That Get Middle-Class People in Trouble
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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For many middle-class households, Social Security feels like a fixed and predictable pillar of retirement. But financial planners say it’s often the assumptions people make about how the system works rather than the program itself that quietly undermines long-term retirement security.
Here are nine assumptions that can cost middle-class retirees money and cause other kinds of trouble.
1. Assuming Social Security Is About To ‘Run Out’
Fear about Social Security’s long-term solvency often drives people to claim benefits earlier than planned, said Ann Shubert, a CFP, founder and financial advisor at Equila Financial. While the Social Security program was not set up to be particularly robust, she said, “it is very unlikely it will go away completely. There are a number of straightforward fixes, such as increasing the amount of wages that are subject to Social Security taxes, that can protect benefits for current retirees.”
John D. Davis, founder and CEO of Legacy Wealth Management, also finds that “most people don’t actually strategize when it comes to Social Security — they just pick a date and start benefits without thinking through how that decision fits into their overall financial picture.”
While there’s no hard-and-fast rule on when someone should start Social Security, everyone should approach it with strategy and a financial plan.
2. Believing Social Security Will Be Enough To Live On
Many middle-class households assume their Social Security benefits will support their current lifestyles in retirement. Jason B. Ball, a CFP and founder of Jason’s Fin Tips, called this a big mistake. “For most middle-class households, it replaces only about 30% to 40% of pre-retirement income exactly as it was designed to do.”
While there may be some parts of the U.S. where this is possible, according to Jay Zigmont, a CFP and founder of Childfree Trust, “it is tight for most.”
3. Not Forecasting Actual Retirement Expenses
Even when people don’t expect Social Security to cover everything, they often don’t have a clear picture of how much income they will really need in retirement, Shubert said. That uncertainty makes planning decisions harder and riskier.
“It takes a bit of focused attention to dig into where your money is going now, and then to make reasonable assumptions about what will change,” she said.
4. Assuming Social Security Benefits Won’t Be Taxed
Social Security taxation regularly catches middle-class retirees off guard, particularly when additional income sources push them into higher tax exposure, Davis said. “Misunderstandings about Social Security taxation usually come from the belief that benefits won’t be taxed at all, or that they’re only taxed for high-income retirees.”
Shubert said that recent messaging around the One Big Beautiful Bill Act led some people to believe that taxes on Social Security would be eliminated altogether, which is untrue.
“What [the OBBBA] actually did was provide an additional ‘enhanced deduction for seniors’ of $6,000 that is supposed to help offset the taxes on Social Security, but it gets phased out at relatively low-income levels, so not everyone will benefit,” she clarified.
5. Thinking You Must Claim Benefits To Get Cost-of-Living Increases
Another common myth is that retirees need to start receiving benefits to obtain annual cost-of-living adjustment increases (COLAs).
“Every year your benefit gets the same cost of living increase no matter whether you are receiving them now, waiting between age 62 and your full retirement age, or even waiting past that to age 70 to get the biggest increase in benefits you can,” Shubert said.
6. Misunderstanding Spousal and Survivor Benefits
Middle-class retirees frequently misunderstand spousal and survivor benefits, which can permanently reduce income for a surviving spouse, Shubert noted.
“They think they can get their own benefit plus their spousal benefit, half of their husband or wife’s amount, on top of that,” she said. In reality, for spousal benefits, a lower-earning spouse can receive up to half of their spouse’s full retirement age benefit in total, but no more.
Survivor benefits are based on the deceased spouse’s benefits with the surviving spouse able to get 100% of the benefits, Shubert clarified. “So, if they were the higher-earning member of the couple, and they took their benefits early, their husband or wife will continue to get that reduced amount after they are gone.”
It’s important to get these decisions right because, Shubert said, “claiming is (mostly) forever.”
7. Overlooking How Medicare Affects Claiming Decisions
Healthcare costs, Medicare timing and premium adjustments often complicate Social Security decisions in ways people don’t expect.
“Another challenge that can come from delaying Social Security is how to cover high medical insurance costs, especially between working years and age 65 when you are eligible for Medicare,” Shubert said.
Zigmont urged middle-class retirees to enroll in Medicare when they hit 65, no matter if you are claiming Social Security at that time or not.
8. Getting Hit by Income Cliffs and Medicare Surcharges
Small increases in income can trigger large jumps in Medicare premiums, surprising many middle-class retirees.
“The biggest income cliff I’ve seen is the yearly Medicare adjustment called the income-related monthly adjustment amount, or IRMAA,” Shubert said. She called it an “absolute cliff,” where one dollar over the limit puts you completely into the next higher bracket.
9. Failing To Stress-Test Plans Before Claiming
Households that don’t stress-test multiple scenarios — including worst-case ones — before locking in Social Security decisions can wind up with less than they planned, Shubert stressed.
“For my younger clients, like those in their 40s and 50s, I generally run a scenario in their financial plan that doesn’t include Social Security at all,” she explained. “This way we can see if their savings and other pensions and retirement benefits can be expected to cover at least their non-discretionary expenses.”
Social Security works best as part of a coordinated plan that accounts for taxes, healthcare costs, timing and the realities of middle-class retirement.
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