Millions Are Confused by These Social Security and Medicare Topics. Here’s What You Need to Know.

Some myths, such as ancient Greek myths, are good, offering insight into the human condition or simple entertainment. Other myths, though, can lead you to make poor decisions and perhaps to lose money, too. Myths regarding Social Security and Medicare fall into that latter category.

Here are some myths dispelled — to help you make smart decisions that might keep you healthier and more financially secure.

Social Security myths dispelled

Myth: Social Security will run out of money soon

There’s some truth in this one, because Social Security’s surplus is running out. The latest estimate is that the combined Old-Age and Survivors Insurance (OASI) Trust Fund and Disability Insurance (DI) Trust Fund can pay 100% of Social Security obligations until 2035, after which point incoming funds will only be able to cover 83% of expected payments owed to beneficiaries. There will still be Social Security tax revenue coming in, though, so the system isn’t going broke. But if nothing is done, future retirees may only get 83% of what they’re due.

Fortunately, there are multiple ways to save Social Security, such as by increasing the tax rate that workers pay into the program, taxing more or all of workers’ incomes (high earners are currently only taxed on a portion of their earnings), or raising the full retirement age.

Myth: You’re eligible to collect Social Security beginning at age 65

Retirement benefits are actually available as early as age 62. Each of us has a “full retirement age” at which we can start collecting the full Social Security benefits to which we’re entitled, based on our earnings history. It’s 66 or 67 for most of us. Those who start collecting benefits early will get smaller ones — but many more of them. Delaying beyond your full retirement age up to age 70 will make them bigger — and that’s the best move for most (but not all) people. So decide when to start collecting Social Security carefully.

Myth: Social Security benefits increase every year

There are cost-of-living adjustments (COLAs) in most years, but not every year. They’re typically not that big, either — the COLA for 2024 was 3.2%, and the upcoming COLA for 2025 may be less than 2.6%, per the nonpartisan Senior Citizens League.

Myth: Social Security benefits are not taxed

They actually are taxed by the federal government — and a handful of states tax benefits, too, though often very lightly. Currently, 41 states do not tax Social Security benefits.

Medicare myths dispelled

Here are a few Medicare-related myths:

Myth: You can enroll in Medicare anytime after your 65th birthday

There’s a little truth to this, but under certain circumstances, if you’re too late in signing up for Medicare after 65, you can face a big penalty on your Part B premium for the rest of your life: an extra 10% for each year in which you failed to sign up on time. So aim to enroll on time — within the seven-month “initial enrollment period” that spans three months before your 65th birthday, your birthday month, and the three months following your birthday month. (Some people can enroll later, if they meet certain criteria.)

Myth: Medicare is free

Nope, it’s not. Many people get to pay $0 in premiums for Part A of traditional Medicare (which covers hospital and related expenses), but they will still face copays and deductibles and often have to pay 20% of the cost of their care. Part B (which covers outpatient care including doctor visits) does have a premium due every month — and it’s $174.70 for most people for 2024. Again, there are other payments also due on top of that. If you opt for a Medicare Advantage plan, you may pay less in premiums, and that’s a solid option for many, but not all, people.

Myth: Medicare and Medicaid are very similar

They’re actually quite different. Medicare is age-based, available for older Americans, while Medicaid is income-based, available to low-income folks. Traditional Medicare doesn’t cover dental, vision, or hearing issues — or prescription drugs (so most people add on Part D for that) — though Medicare Advantage plans tend to include that coverage. Medicaid differs from state to state but there’s no premium and much of the coverage it offers is free, including nursing home care. Some older and poorer people can qualify for both Medicare and Medicaid.

There are other myths and facts to learn about both programs, and the more you know, the more you can get out of them. So as you plan for your retirement, read up on both Social Security and Medicare.