8 Social Security Myths

There are many myths and misunderstandings surrounding Social Security. Before taking anything as fact do a bit of research and make sure the information you are hearing is correct. The Social Security website is full of useful information. You can also call them with any specific questions. Here are just a few subjects that have been miscommunicated over the years.

1. Social Security is going to disappear and not be available when I retire: This has been a longstanding concern for many years. The idea that the Government will run out of money and not be able to provide benefits for future retirees. Social Security is funded by payroll taxes and as long as people are working and paying taxes the program will continue as well. But there are issues. The aging population is growing in the United States. When the percentage of people who are retired and are no longer paying into the Social Security program outnumbers those still working the system will be strained because the system is paying out more than it is collecting. In the past Social Security has increased the age for eligibility and increasing the payroll tax rate. That could happen again. Congress needs to step up and take action to secure the system and one way we can make this happen is by speaking up and letting our elected officials know this is an important issue for us.
2. The Government taps into Social Security to fund other programs: Social Security is made up of two trust funds. One fund is for retirees and their survivors, and the other is for disabled individuals. This is a separately funded program and not part of the Governments general fund. It is true that the Government has borrowed money from the Social Security fund. But it is required that the Government pay back the money they borrow with interest. To date the Government has paid back all of the money it has borrowed and since the repayments include interest the Social Security fund is receiving more money back than what was borrowed. But the borrowing has fueled the rumor that the Government is raiding Social Security.
3. Undocumented immigrants are receiving Social Security benefits: Undocumented immigrants do not receive Social Security payments. However, Noncitizens who live and work in the United States legally can.
4. Social Security was setup and intended to be a full retirement account: President Theodore Roosevelt signed into law Social Security on August 14, 1935. Initially called The Federal Social Insurance Program it was intended to keep people off the streets and prevent them from going hungry. This is a quote from President Roosevelt in a statement he gave at the bill signing ceremony “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”–President Roosevelt. President Roosevelt also said “The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built.” This was during the Great Depression when much of America was struggling just to provide food for their families and keep a roof over their heads. It was intended as a supplement but not a fully funded retirement program that would act alone and provide citizens with all of the money they would need when they retired.
5. You don’t pay taxes on Social Security benefits: Initially we did not pay taxes on Social Security but in 1984 that changed, Congress implemented a provision that federal taxes would be paid on up to 50 percent of benefits if your income for the year is $25,000 to $34,000 for an individual and $32,000 to $44,000 for a couple. Above those levels, up to 85 percent of benefits are taxable. If you fall below that level, you will not owe.
6. If you work and earn money after you retire you will lose your benefits: If you are of full retirement age you can work and it will not impact your Social Security benefits. If you are under full retirement age, $1.00 in benefits will be withheld for every $2.00 you earn above a certain yearly limit. In the year you reach full retirement age, $1.00 in benefits will be withheld for every $3.00 you earn above a certain annual limit until the month you reach full retirement age.
7. If an ex-spouse claims benefits under your name your payments will be reduced: While it is true an ex-spouse can claim benefits under your Social Security account, your payments will not be reduced. An ex-spouse is entitled to claim up to 50% of the benefits you are entitled to at retirement age. You will still be entitled to your complete benefits at retirement.
8. Everyone should wait until full retirement age so that they can claim the most benefits: If you wait until full retirement age you will receive the full amount you are entitled to, but some people want to retire early, meet with a financial advisor who specializes in Social Security to review your options.

The United States Social Security Administration (ssa.gov)