Busting the Top Five Social Security Myths

Social Security turned 75 last month. The program continues to be held in high regard by a majority of the public. The enthusiasm for the program, however, is tempered by fears that its funding is not solvent.

Social Security provides economic security to millions of Americans. In addition to those who receive retirement benefits, one-third of Social Security's beneficiaries are people collecting survivors or disability insurance. Since the program provides a safety net to so many, concerns about its funding deserve examination.

Myth #1 There Will Not Be Any Money Left in Social Security to Pay Your Benefits

In spite of the economic downturn, Social Security currently operates with a significant surplus. In 2009 the surplus was $2.6 trillion, and it is projected to reach $4.3 trillion in 2023. This surplus has been accumulated in preparation for retiring baby boomers. Without any changes, there is enough money in the trust fund to pay out all benefits through 2037. After 2037, Social Security could still pay over three-fourths of scheduled benefits using its tax income.

Myth #2 The Social Security Trust Funds Only Holds IOUs

The Social Security Trust Funds are the Old-Age and Survivors Insurance (OASI) and the Disability Insurance (DI) Trust Funds. These funds are invested in U.S. Treasury bonds, considered one of the most secure investments worldwide.

Myth #3 Americans are Living Longer so the Retirement Age Should be Raised

The increase in life expectancy is not as significant as one may think. Declining child mortality is a substantial driver of average life spans increasing. Life expectancy at the age of retirement has grown fairly slowly. Other significant gains in life expectancy have occurred during working years (after age 20 and before retirement). Therefore, Americans are working longer and contributing more to Social Security.

Myth #4 Social Security Contributes to the Deficit

This is wrong on two fronts. Social Security funds are separate from the budget (it pays its own way via the payroll tax) so it cannot add to the deficit. Secondly, the program has been running at a surplus for the past 25 years.

Myth #5 Benefits Need to be Cut to Fix Social Security

There are several options available to improve Social Security's long range soundness. For example, currently those earning high incomes only pay taxes on the first $106,800. Changing this provision or making modest payroll tax increases would make the program more sustainable.

If you are entitled to Social Security benefits related to a disability, do not be hesitant to pursue applying. There is money available to provide a safety net for those who need it most. An experienced attorney can determine what benefits you may be entitled to and guide you through the process.