Statistics show that most retirees will rely at least somewhat on Social Security to make ends meet. Yet if you have been interacting with clients around the topic at all, you know there are plenty of myths and misconceptions. Perhaps you've even fallen for some of them yourself. Here are five concrete truths about Social Security that you can take to the bank. Hopefully none of them are a surprise to you, but you might be surprised how many clients believe the myths.
- It’s not going bankrupt.
Even though the program is going to begin paying out more in benefits than in collects in revenue this year, and predicted to run out of reserves by 2034, it cannot go fully bankrupt. The payroll tax and taxation of benefits will always keep bringing in at least some money.
- It’s not an entitlement program
Not all Americans are entitled to retirement benefits or disability. You must earn 40 lifetime work credits (or be married to someone who has). That means working for at least 10 years in a job where part of your income goes to Social Security taxes.
- Undocumented immigrants aren’t receiving Social Security benefits
Although an analysis by AARP in 2010 found that wages of undocumented immigrants contributed $12 billion to Social Security, the immigrants cannot collect any of it. However, noncitizens can collect Supplementary Secrutiy Income, or SSI. It is funded separately from “normal” Social Security.
- Congress hasn’t stolen from Soical Security
The Social Security Trust primarly purchases special-issue Treasury bonds to generate income that helps cover its costs. “Paying back” the money wouldn’t do any good.
- Cost-of-living adjustments are flawed
The problem with the COLA is its tethered measure of inflation: The CPI-W, which focuses on working-age urban and clerical workers, not the elderly. This leads to important expenditures like medical care and housing not being factored in as much as they should be. Seniors have seen their purchasing power decline by 34% since 2000, according to the Senior Citizens League.
You can find the full article at Nasdaq.