Social Security has a lot of moving parts, and it can be challenging to keep up with the many modifications that the program goes through each year. All of the yearly changes can cause a lot of misinformation about this vital government program and lead to a few ideas about Social Security that flat-out aren't true.

With about 63 million Americans relying on Social Security, it's worth spending a little time dispelling a few of the rumors going around. Namely, that Social Security will run out of money soon, that you must file for benefits right when you retire, and that retirees don't have to pay taxes on their Social Security benefits.

Social Security cards stacked on top of each other.

Image source: Getty Images.

Myth No. 1: Social Security will be bankrupt soon

There's a lot of talk these days about how Social Security is going broke and that it even has the potential to go bankrupt. Why are people saying this? Because beginning in 2022, the Social Security program will pay out more in benefits than it brings in. That'll be the first time that happens in several decades, and it understandably has people worried.

Social Security is funded, mostly, by a 12.4% tax collected on income up to $128,4000 (6.2% is paid by the employer and 6.2% by the employee). That money is then used to pay out benefits to retirees who paid into the system when they were working.

But America's aging population, coupled with the fact that people live longer than ever before, will eventually cause the gap between Social Security revenue and payouts.

The good news is that as long as people are working in the U.S., there will always be funds for Social Security. So in that sense, it's not going broke, and there will be money for future retirees.

The problem is that in the coming decades, benefits may have to be scaled back to make up for the shortfall. Which means that it's all the more important for current workers to save for retirement instead of leaning entirely on Social Security for their retirement income.

Myth No. 2: You have to start taking benefits when you retire

The good news is that you can retire whenever you're able to, and the government will not force you to start taking your Social Security benefits. So let's say that you're 60, you've reached the age requirement for your full pension benefits at your job, and you're ready to retire. You can do that and still wait to file for Social Security.

The earliest you can file anyway is 62, but you can wait all the way up to 70 if you want. Technically, you can even wait longer, but there's no financial incentive for you to do so.

Social Security pays your benefits based on a calculation using your top 35 earnings years, and you receive the full monthly amount when you reach your full retirement age (FRA). Which means that filing for benefits at age 62 will net you a lower monthly amount than if you wait until your FRA. You can find out what your full retirement age is by clicking this link.

So if you want to retire, but you're not ready to file for Social Security yet, feel free to start your well-deserved retirement, and file for benefits when you're ready.

Myth No. 3: You don't have to pay taxes on Social Security benefits

This one may be kind of a bummer to debunk if you're generating other income in retirement that's not part of your Social Security benefits. If you're working while collecting Social Security or have other sources of income, then up to 85% of your Social Security income could be taxable.

The government determines whether you should be taxed, and at what rate, based on your combined income -- which is your adjusted gross income, plus nontaxable interest, and half your Social Security benefits.

For example, if you're married and file your taxes jointly, and your combined income is more than $44,0000 in retirement, then 85% of Social Security benefits could be taxable. You can use this calculator to help you determine what your potential tax rate will be.

The tax rates vary, and the lower your income, the lower the percentage of your Social Security benefits that are eligible to be taxed. Understanding how the government may tax your benefits is a good thing to keep in mind as you plan for retirement and how much money you'll receive from Social Security. It's also worth pointing out that while most states don't charge tax on Social Security, 13 states do.

The best thing you can do for your retirement

One of the best things you can do for your retirement is to plan ahead. Whether you have 30 more working years ahead of you or just three, you should spend some time planning out your retirement strategy and stashing away as much money as possible. Social Security was never meant to be a substitute for your retirement savings, and if cuts are coming to the program, then it's as important as ever to consider Social Security as just one piece of a larger retirement puzzle.

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