5 Social Security Myths Costing Retirees Real Money in 2026

The Social Security Myths I Keep Hearing — And Why They’re Dangerous

In my 18 years as a Certified Financial Planner, I’ve watched myths about Social Security cost my clients tens of thousands of dollars in lifetime benefits. Not hypothetically — real money lost because of outdated assumptions, viral misinformation, and well-meaning but wrong advice from friends at the golf course.

With a projected 2026 cost-of-living adjustment (COLA) of just 2.2% to 2.5% — a sharp drop from the 3.2% increase in 2024 and the historic 8.7% in 2023 — retirees are heading into a tighter financial landscape. Congress is simultaneously considering legislation that could change how COLAs are calculated entirely. And a recent survey by the Employee Benefit Research Institute found that 40% of retirees are depleting their savings faster than expected due to persistent inflation.

This is not the moment to operate on bad information. Let me walk you through the five Social Security myths I encounter most frequently — and what the evidence actually shows.

Myth #1: “The 2026 COLA Will Keep Up With My Actual Expenses”

What People Believe

Many retirees assume the annual COLA is specifically designed to keep their purchasing power intact. They hear “cost-of-living adjustment” and think it means Social Security tracks what they actually spend money on — housing, healthcare, food, and utilities.

The Truth

The current COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks spending patterns of working-age urban consumers — not retirees. This index heavily weights commuting costs, work clothing, and other expenses that don’t reflect senior spending. Meanwhile, it underweights the categories where seniors spend the most: healthcare, prescription drugs, and housing.

According to the Social Security Administration, the preliminary 2026 COLA estimate sits around 2.2% based on first-quarter 2025 CPI-W data. For the average retired worker receiving $1,976 per month, that translates to roughly $43 more per month — about $516 annually.

But here’s the problem I explain to every client: the Bureau of Labor Statistics’ experimental CPI-E (Consumer Price Index for the Elderly) has consistently shown that senior-specific inflation runs 0.2% to 0.3% higher than CPI-W annually. That sounds small, but over a 25-year retirement, it means a cumulative purchasing power loss of 5% to 7.5% — thousands of dollars that quietly disappear.

Congress is currently considering the Social Security Fairness Plus Act and other proposals that would switch to a CPI-E-based calculation. Whether these pass remains uncertain, but the legislative conversation itself tells you something: lawmakers recognize the current formula shortchanges seniors.

What You Should Do

Don’t treat your COLA increase as a raise. Treat it as an incomplete inflation offset and plan for the gap. I recommend building a personal inflation buffer of 1% to 2% above the official COLA into your annual retirement budget.

Myth #2: “I Should Claim Social Security as Early as Possible Before It Runs Out”

What People Believe

This is the myth that probably costs retirees the most money. I hear it weekly: “Margaret, the trust fund is going broke. I need to grab my benefits at 62 before there’s nothing left.” Social media amplifies this fear relentlessly, and it drives terrible decision-making.

The Truth

Let me be direct: Social Security is not going to zero. The 2024 Trustees Report projects the Old-Age and Survivors Insurance (OASI) trust fund reserves will be depleted by approximately 2033. But “depleted reserves” does not mean “no benefits.” Even after 2033, incoming payroll taxes would still fund approximately 79% of scheduled benefits.

That’s a reduction, not an elimination — and Congress has strong political incentive to act before that happens. They’ve done it before: in 1983, bipartisan legislation rescued the program when it was within months of insolvency.

Now here’s the math that matters for your claiming decision. If your full retirement age (FRA) is 67 — as it is for anyone born in 1960 or later — claiming at 62 permanently reduces your monthly benefit by 30%. Waiting until 70 increases it by 24% above your FRA amount through delayed retirement credits.

Claiming Age	Monthly Benefit (FRA Amount: $2,000)	Annual Benefit	Cumulative by Age 85
62	$1,400	$16,800	$386,400
65	$1,733	$20,796	$415,920
67 (FRA)	$2,000	$24,000	$432,000
70	$2,480	$29,760	$446,400

Look at that cumulative column. If you live to 85 — which is entirely average for a healthy 62-year-old today — waiting until 70 nets you $60,000 more in lifetime benefits than claiming at 62. And every year you live beyond 85, the gap widens further.

Of course, early claiming makes sense for some people — those in poor health, those who need the income to avoid high-interest debt, or those with limited other resources. But making a permanent 30% benefit cut because of a misunderstanding about trust fund mechanics? That’s a myth-driven mistake I’ve seen destroy retirement plans.

Myth #3: “My Social Security Benefits Aren’t Taxed”

What People Believe

A surprising number of retirees — including people with six-figure retirement portfolios — believe Social Security income is tax-free. Some remember a time when it was. Others confuse Social Security with certain types of pension income. Either way, this misconception leads to nasty surprises every April.

The Truth

Up to 85% of your Social Security benefits can be subject to federal income tax, depending on your “combined income” (adjusted gross income + nontaxable interest + half of your Social Security benefits). Here’s how the thresholds work for 2025, according to the IRS:

• Single filers: Combined income between $25,000 and $34,000 — up to 50% of benefits are taxable. Above $34,000 — up to 85% are taxable.
• Married filing jointly: Combined income between $32,000 and $44,000 — up to 50%. Above $44,000 — up to 85%.

Here’s what makes this particularly insidious: these thresholds have never been adjusted for inflation since they were set in 1983 and 1993. What was originally designed to tax only higher-income retirees now captures middle-income households. A couple with $30,000 in Social Security and $25,000 in IRA withdrawals is already past the 85% threshold.

What I see most often is retirees who take large traditional IRA or 401(k) distributions in a single year — maybe for a home repair, a medical expense, or to help a grandchild — and suddenly find 85% of their Social Security is taxable. That one distribution can push their effective tax rate dramatically higher.

Strategic Moves That Help

1. Consider Roth conversions before claiming Social Security. Converting traditional IRA funds to a Roth IRA between retirement and age 70 (while your income may be lower) means those future withdrawals won’t count toward combined income.
2. Manage the timing of large distributions. Spread large withdrawals across multiple tax years rather than taking a lump sum.
3. Watch for IRMAA triggers. High-income years can also trigger Medicare’s Income-Related Monthly Adjustment Amount, adding surcharges to your premiums. Learn more about how retirees can avoid higher 2026 Medicare premiums (IRMAA).
4. Use tax-efficient withdrawal sequencing. Draw from taxable accounts first, then tax-deferred, then Roth — though the optimal sequence varies by individual situation.
5. Check your state taxes. Thirteen states still tax Social Security income to some degree. Know your state’s rules.

Myth #4: “I Can’t Work in Retirement Without Losing My Benefits”

What People Believe

With 7% of retirees returning to work amid high costs — according to a 2025 report from the National Institute on Retirement Security — this myth is causing real harm. Many retirees believe any earnings will eliminate their Social Security check entirely, so they either avoid working or work under the table (creating legal and tax problems).

The Truth

If you’ve reached your full retirement age, there is no earnings limit whatsoever. You can earn $500,000 a year and your Social Security benefit won’t be reduced by a single penny.

Before FRA, there is a reduction — but it’s not what most people think. In 2025, if you’re under FRA for the entire year, Social Security withholds $1 for every $2 you earn above $22,320. In the year you reach FRA, it’s $1 for every $3 above $59,520 (counted only for months before your birthday month).

But here’s the part almost nobody knows: those withheld benefits aren’t lost. The SSA recalculates your benefit upward once you reach FRA to account for the months when benefits were withheld. You eventually get that money back through higher monthly payments for the rest of your life.

I often tell my clients that part-time work in retirement isn’t just financially beneficial — it’s associated with better cognitive health and social connection. If you’re considering returning to work or picking up a side income, don’t let this myth stop you. Some retirees are even turning hobbies into meaningful cash flow in 2025.

Myth #5: “My Savings Will Last Because I’ve Budgeted for 3% Annual Inflation”

What People Believe

Traditional retirement planning uses a 3% inflation assumption — the long-term historical average. Many retirees set their withdrawal strategy based on this number and assume they’re covered. Some haven’t revisited their plan since before 2021.

The Truth

The period from 2021 to 2024 delivered cumulative inflation of approximately 20.8%, according to BLS data. Even though the annual rate has moderated to around 2.8% in early 2025, prices didn’t come back down — they just stopped rising as fast. That gallon of milk, that Medicare supplement premium, that property tax bill — they’re all 20% higher than four years ago, and they’re staying there.

For retirees on fixed income, this created a structural gap. The Employee Benefit Research Institute’s 2025 Retirement Confidence Survey found that 40% of retirees are spending down savings faster than planned. Among those aged 70 to 79, the figure rises to 47%.

What makes this particularly dangerous is category-specific inflation. Senior-relevant categories have outpaced headline inflation:

• Healthcare services: Up 4.1% year-over-year in Q1 2025
• Home insurance: Up 8.9% in many markets
• Prescription drugs (non-generic): Up 3.7% on average
• Property taxes: Rising in most states due to reassessments based on elevated home values

A retiree who budgeted for 3% annual inflation across the board is effectively underfunded in the categories that matter most to them.

How to Build a Real Inflation Defense

1. Audit your actual spending annually. Don’t use national averages — track your real expenses. Free tools from the Consumer Financial Protection Bureau can help.
2. Allocate 20-30% of your portfolio to inflation-sensitive assets. Treasury Inflation-Protected Securities (TIPS), I Bonds (up to the $10,000 annual limit), and short-duration bond funds provide direct inflation hedges.
3. Maintain some equity exposure. Even at 70, a portfolio with 30-40% in diversified equities has historically outpaced inflation over rolling 10-year periods. The S&P 500’s annualized return over any 15-year period in history has been positive.
4. Review your Medicare coverage annually. Plan costs, formularies, and networks change every year. What saved you money in 2024 may cost you more in 2026.
5. Consider a “retirement raise” strategy. Increase your annual withdrawal by your personal inflation rate — not the national CPI — and stress-test it against your portfolio’s projected longevity.

The Bigger Picture: What 2026 Actually Looks Like for Retirees

Let me put the pieces together. Here’s what I see converging in 2026:

A COLA of roughly 2.2% to 2.5% — the smallest increase since 2021’s 1.3%. Medicare Part B premiums are expected to rise, potentially eating most or all of that COLA increase (preliminary estimates suggest a monthly Part B increase of $10 to $15). Several states are hiking health plan costs for retirees and public employees. And persistent “sticky” inflation in groceries, insurance, and services continues to erode fixed-income purchasing power.

This isn’t a crisis — but it’s a squeeze, and squeezes punish people who operate on myths instead of facts.

Three Things I Want Every Retiree to Do This Month

1. Log into your my Social Security account at ssa.gov. Verify your earnings record, check your projected benefits at different claiming ages, and make sure your direct deposit and tax withholding information is current. Errors in earnings records are more common than you’d think, and they directly reduce your benefit.
2. Run a tax projection for 2025. Before year-end, estimate your combined income and see where you fall on the Social Security taxation thresholds. If you’re close to a bracket boundary, you may be able to time distributions or Roth conversions to stay below it.
3. Pressure-test your retirement plan against 5% inflation, not 3%. If your savings survive a 5% inflation scenario for 25 years, you’re in solid shape. If they don’t, you know exactly where to make adjustments now — before the math forces the decision for you.

While you’re reviewing your finances, it’s also worth making sure you’re not vulnerable to the growing wave of financial fraud targeting older Americans. Scammers increasingly impersonate the SSA and Medicare — learn how to protect yourself from online scams targeting older adults.

The Bottom Line

Social Security myths persist because they feel true. They confirm our fears or tell us what we want to hear. But retirement is too long and too important to navigate on feelings. The 2026 landscape — with its modest COLA, rising Medicare costs, and lingering inflation effects — rewards retirees who operate on evidence.

In my experience, the clients who build the most resilient retirements aren’t the ones with the biggest portfolios. They’re the ones who challenge their assumptions, stay informed, and adjust their plans when the facts change. The myths I’ve outlined here are costing real people real money every single day. Don’t let them cost you.