Please ensure Javascript is enabled for purposes of website accessibility

3 Social Security Myths You Shouldn't Believe During COVID-19

By Maurie Backman - May 28, 2020 at 5:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ongoing pandemic may be affecting Social Security, but perhaps not in the way you think.

The internet makes it easy to access news, but that can be both a blessing and a curse. Just as there's a lot of misinformation circulating about COVID-19 itself, there's also a fair amount of false data to be heard about Social Security. Buying into the following myths is apt to make an already stressful period of life even more harrowing, so don't fall into these traps.

1. COVID-19 will wipe out Social Security completely

Social Security's primary source of revenue is payroll taxes. This year, employees pay a 12.4% tax on up to $137,700 in earnings. Salaried workers pay half of that 12.4%, and the companies they work for pay the other half. Self-employed workers, meanwhile, pay the entire 12.4%.

Because so many Americans are currently out of a job, and therefore aren't subject to payroll taxes on their wages, it's clear that Social Security is not only losing revenue at present, but it's likely to do so for much of the year. While that may constitute a financial setback for Social Security, there's no reason to believe it will doom the program forever. Once the economy recovers, we're apt to see the unemployment rate decline, at which point Social Security will get to enjoy a healthier revenue stream. Even if current unemployment levels hold steady for another year, it won't be enough to wipe the program out -- not even close.

A stack of Social Security cards


2. You can't apply for Social Security during the COVID-19 crisis

Back in March, Social Security closed its field offices in an effort to support social distancing and protect our most vulnerable population. As such, you may be led to believe that you can't file for benefits.

Thankfully, that's not true. You can easily create a Social Security account online and register for benefits when you're ready -- provided you're at least 62 years of age.

3. Social Security recipients who lose their jobs during COVID-19 can't claim unemployment benefits

Some people work and receive Social Security benefits simultaneously. If that's your situation and you lose your job, you might assume that collecting Social Security will render you ineligible for unemployment benefits. But again, that's not true.

It used to be the case that some states would reduce your unemployment benefits if you were collecting Social Security at the time of your filing, but that practice has been eliminated. As such, you can tap both income sources if you're out of work during the pandemic.

Furthermore, if you collect both Social Security and a paycheck from work prior to reaching full retirement age, you may have some benefits withheld if your work income exceeds what's known as the earnings test limit. But unemployment benefits don't count as wages toward that limit, so they shouldn't impact your Social Security income at all.

At a time when there are so many reasons to be anxious, the last thing you need is to fall victim to misinformation. Avoid buying into the above myths, and you'll spare yourself some unnecessary stress.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.