Posted on Wednesday, October 30, 2024

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by Russell Gloor, AMAC Certified Social Security Advisor

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Social Security Myths are Pervasive

In my efforts to explain Social Security to those who ask questions, it is often necessary to provide information contrary to the questioner’s understanding of how Social Security works. Some folks who write us possess what might be considered “alternative facts,” usually obtained via the internet, about how Social Security operates, and, more often than not, these “alternative facts” are merely internet myths. Fact is, Social Security is a very complex program consisting of over 2,700 rules codified in over 100,000 pages of Social Security documentation, designed to handle myriad personal circumstances.  Unfortunately, many of these rules can be easily misinterpreted and, thus, become persistent internet myths which, it appears, are exceedingly difficult to refute. After all, if “alternative facts” are repeated often enough, they are perceived as truth. Such is the case with the persistent belief by many that the Social Security payroll taxes one pays while working are deposited into a personal account, from which that person’s eventual Social Security retirement benefit will be paid.  And that is, simply, incorrect.

Admonished for Correcting the Myth

Here at the AMAC Foundation’s Social Security Advisor Service we have, many times,  explained that the SS payroll taxes paid by workers do not go into a personal account for them but, rather, go into the Social Security Trust Fund from which benefits to all recipients are paid. I’ve also published numerous articles explaining this, which sometimes causes some to think I’m misinformed and they take me to task for providing incorrect information. One such recent interaction chastised me for a different reason – when I explained that the payroll taxes they paid while working weren’t used to pay their current SS benefit and that their SS benefit is actually being paid by others now working, they suggested it was insulting and wrong to imply that others are now paying for their SS benefits because they earned those benefits by previously paying into Social Security.

The description of how benefits are earned is, of course, true. The payroll taxes each person pays earn “quarter credits” which, after 40 credits are accumulated, entitles the person to Social Security retirement benefits. In that sense, it is, indeed, the person’s own payroll contributions which entitles them to Social Security benefits. But the fact is that the Social Security benefits now being received by this person are being funded by others who are currently working and contributing to the program (current benefits are not funded from the recipient’s previous individual payroll contributions). Indeed, the actual monetary contributions each person makes to Social Security would likely be insufficient to pay their full SS benefits for a lifetime due to ever-increasing life expectancy. Each person rightfully earns their own Social Security retirement benefit by working, but payment of those benefits is funded by those currently working and contributing to Social Security. That isn’t meant as an insult, it is merely a fact.

Other Social Security Myths

This is only one of the multiple myths about Social Security which our Social Security Advisory Service deals with every day.  Several other persistent myths are:

• Myth: Politicians have “stolen” Social Security money for other purposes. The most persistent example of this assertion is that President Lyndon Johnson took Social Security money to fund the Vietnam War, but many other similar incorrect assertions exist as well.  Fact: No Social Security money has ever been used for any purpose other than paying Social Security benefits.
• Myth: “Full” Social Security benefits are available at age 65.  Age 65 is no longer Social Security’s “Full Retirement Age” (FRA). FRA today is somewhere between age 66 and 67 depending on when you were born. Fact: Claiming Social Security at age 65 will result in a smaller monthly benefit than if claimed at the person’s actual FRA.
• Myth:  Benefits are based on the last 5 (or 10) years of work earnings. Social Security benefits are based on each person’s lifetime earnings.  Fact: Lifetime annual earnings are adjusted for inflation and the average of the highest earning 35 years is used to calculate the person’s Primary Insurance Amount (which is the amount they receive at their FRA).
• Myth:  A Spouse always gets 50% of their partner’s Social Security benefit.  Fact:  Spouses can get a maximum of 50% of their partner’s full retirement age amount, but only if they claim SS at their own FRA, and only if their own SS retirement amount is less than half of their spouse’s FRA entitlement. Spouse benefits are always based on FRA amounts regardless of the age benefits are actually claimed, and always reduced if claimed before the full retirement age.
• Myth:  Congress only needs to pay back what was borrowed from Social Security to make the program solvent again. Social Security’s solvency issue is much more complex than that.  Fact: Paying back what Social Security has invested in “Special Issue Government Bonds” would actually exacerbate the program’s insolvency because of the loss of interest on Trust Fund reserves. A much more robust solution to the insolvency issues is needed, as in AMAC’s Social Security Guarantee proposal .

Learning the truth

There are other myths, as well, which sometimes confuse those who contact us. But rest assured that the AMAC Foundation will ALWAYS provide accurate information about Social Security, tailored to your specific circumstances. Just email us at [email protected], or call us at 1.888.750.2622, for a personal evaluation of your Social Security options.  And we’ll clarify any misunderstandings you might have about how Social Security really works.