Social Security Myths
A huge number of Americans retire each year. In fact, more and more Baby Boomers began 2017 by exiting the workforce, and with nothing on their schedule except plans to golf, travel, and spend more time with the grandkids. The number of Americans at retirement age (65 or older) without a disability that aren't in the labor force rose by 800,000 in the fourth quarter of 2016.
Retirees and future retirees depend on, or will depend on, income from Social Security to help provide a financially comfortable lifestyle, but there is a lot of misinformation out there about the program.
Example: We’ve probably all heard at some point that Social Security is broke. Or have you heard that the government stole trillions from Social Security's reserves?
Here are some common Social Security myths, as well as the truth behind each:
Myth: Social Security is broke
This is FALSE.
Don’t believe the hype. Social Security has $2.85 trillion in reserves and ran a $35 billion surplus in 2016. What's more, the surplus is expected to continue to build the reserves for another five years.
However, some realistic (and concerning) forecasts are not to be written off. After 2021, thanks to the retirement surge of the Baby Boomer generation and longer life expectancies, Social Security is expected to go into a deficit, which will continue for the foreseeable future. In 2034, the Social Security trust funds are expected to be completely depleted.
Myth: Social Security won't exist when I retire
At the very least, this is highly unlikely.
Even if Social Security completely runs out of money, as it is projected to do in 2034, the incoming payroll taxes will be enough to cover 77% of promised benefits. So as a worst-case scenario, we're talking about a 23% across-the-board cut, not elimination of the program, unless Congress for some reason decides to abolish the payroll tax.
Myth: The government 'raided' Social Security's reserves
FALSE.
You may have heard this, or some variation of it. And as mentioned above, there are several trillion dollars in Social Security's reserves.
However, the Social Security trust fund isn't just sitting in a bank account somewhere. To generate income, the Social Security Administration invests the money it has in special U.S. government bonds.
This is a win-win for the government and Social Security. The government is able to use Social Security's excess cash to fund its operations, and Social Security generates extra income.
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