Social Security (SS) seems to continuously bask in some sort of media spotlight, enjoying the notoriety and criticism that can only be afforded to programs that are controversial necessities.
The frustrations surrounding an individual’s income being taxed to support another’s payments are not new, nor will they soon disappear.
Unfortunately, the combination of frustrations and complex, convoluted government programs breeds misinformation.
Below are four common Social Security myths, why they are false and a possible explanation for their existence.
Myth 1
Version 1: Participating in Social Security is voluntary.
Version 2: FDR promised that participating in Social Security would be voluntary.
Debunk
There are issues with both versions of this myth. From the beginning of Social Security’s implementation, FICA payroll tax was in place. As with any tax, participation was not voluntary, but rather mandatory. From day one, any employer covered by SS is subject to the tax.
Why Is This Myth Around?
Perhaps this myth gained popularity because in the early stages of SS’s implementation, not all employers were yet covered by Social Security.
Myth 2
Version 1: The money collected from the FICA payroll tax doesn’t necessarily stay in a reserve for Social Security.
Version 2: Congress can spend my SS.
Debunk
While the accounting practices have changed throughout the years, the money designated for Social Security, the money that finances SS programing, the money taken from your paycheck goes into the Social Security Trust Fund.
Why Is This Myth Around?
According to the Social Security website, this myth has garnered popularity all because of accounting practices—designating the Social Security Trust Fund as “on-budget” or “off-budget.”
“Starting in 1969…the transactions to the Trust Fund were included in what is known as the ‘unified budget.’ This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are ‘on-budget.’ This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken ‘off-budget.’ This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are ‘on-budget’ or ‘off-budget’ is primarily a question of accounting practices—it has no [e]ffect on the actual operations of the Trust Fund itself.”
Myth 3
My Social Security payments will be based on the ten years of work immediately prior to when I start receiving payments.
Debunk
SS payments are based on the “best 35 years of work.” In other words, the average earnings you have made throughout your lifetime.
Why Is This Myth Around?
This misconception has two main truth roots: 1) you can postpone SS to increase your income, but that earnings maximization does not come from the years at the end of your employment lifespan, but rather the fact that there are more years in total to take the 35 year average from; 2) if you do not have 35 years of employment (e.g. mid-career disability) fewer years will be used to determine your payment, which can lead to the perception that the years immediately prior are the only years in consideration.
Myth 4
Social Security is going broke.
Debunk
SS is currently running a surplus, and estimates to continue the surplus for the next five-ten years.
Why Is This Myth Around?
For one, the myth has gained ground because SS payments do exceed payroll tax revenues—but what that support claim ignores is that there are other revenue streams flowing into SS payments. Secondly, this myth has a glimmer of a potential truth: something will have to be done once the surplus ceases to exist, but because of Social Security’s popularity, it is as close to guaranteed as anything in the uncertain future can be that the gap of needed funds will be closed before we need to panic.
This is by no means an exhaustive list of Social Security myths, but rather, just a brief glimpse into the widely circulated misinformation about one of our country’s most politically popular programs. Keep in mind that the Social Security program is the cheapest way to provide financial security for our country’s retired and disabled population.
Also, remember that as with any myth, grains of truth can fester and lead to harmfully infectious misinformation. Take it upon yourself to understand our Social Security program now, regardless of your age or how close you are to receiving payments.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.