Courtesy of the Social Security Administration
Courtesy of the Social Security Administration

As Americans continue to age nationally, Social Security Insurance will be a source of income for millions during their golden years. However, there are myths about the program in the general population, according to AARP’s May 28 web letter, that are simply not true.

Myth #1: Social Security is Going Broke.

The Facts: As long as workers and employers pay payroll taxes, Social Security (SS) will not run out of money. It is a pay-as-you-go system with revenue coming in from the Federal Insurance Contributions Act and the Self-Employed Contributions Act taxes deducted from pay. While the system presently is solvent, it has paid out more than it has taken in recently and if major changes aren’t made, experts estimate the system will be in a financial crisis by 2035.

Myth #2-The SS Retirement Age is 65.

The Facts: The full retirement age — when a worker qualifies for 100 percent of the benefit calculated from lifetime earnings — is 66 years old and 2 months. Over the next five years, it will increase by two months at a time, setting at 67 for people born in 1960 and after.

Myth #3: The Annual COLA is guaranteed.

The Facts: Since 1975, SS law has required benefit amounts be adjusted annually for inflation but there is no requirement that this cost-of-living adjustment (COLA) produce a yearly increase. COLA increases are tied to a federal index of prices for select consumer goods and services. If there are increases, they will likely be a COLA. Congress and the president have nothing to do with this process. They would have to take separate action to change the COLA.

Myth #4: Members of Congress Don’t Pay into SS.

The Facts: Contrary to popular belief, members of Congress came into the SS system in 1984. Before that, lawmakers paid into the Civil Service Retirement System. Those in office on Jan. 1, 1984, were allowed to remain in the civil service system but only in conjunction with Social Security. By the way, two senators and five House members remain from those days.

Myth #5: The Government Raids SS to Pay for Other Programs.

The Facts: The two trust funds that pay out SS benefits—one for retirees and their survivors, the other for people with disabilities—have never been part of the federal government’s general fund. While SS is a separate, self-funded program, the federal government does borrow from it and pays the money by way of a fixed process.

Myth #6: Undocumented Immigrants Drain SS.

The Facts: Undocumented people cannot claim benefits under SS. Some do get SS numbers under false pretenses and payroll taxes are deducted, even though they will not collect benefits later in life. However, there is evidence undocumented employees actually improve SS’s bottom line. A report by SS actuaries said undocumented immigrants made a net contribution of about $12 billion to the program in 2010 and their earnings would likely continue to “benefit the financial status” of SS.

Myth #7: SS is Like a Retirement Savings Account.

The Facts: The government doesn’t stow your payroll tax contributions in a personal account for people to be paid out with interest when you retire. Your benefit is based on how much money you earned over your working life, not how much you paid into the system.

Myth #8: People Don’t Pay Taxes on SS Benefits.

The Facts: That was true until 1984. The system was overhauled the previous year and a portion of your SS benefits are taxable, depending on income level. Anyone with less than $25,000 a year in income won’t pay SS taxes but higher amounts are assessed on a rising scale. Some states tax SS benefits also.

Myth #9: An Ex-Spouse’s Benefits Come Out Of Your Own.

The Facts: If you are divorced, your ex-spouse may be eligible to get SS benefits based on your earnings record and (vice versa). As for benefits with a current spouse, these can be up to 50 percent of the benefit amount you are entitled to at full retirement age. However, those ex-spousal (or spousal) benefits don’t reduce your SS. You get benefits based on your earnings history and the age you file for SS.

Myth #10: People Lose Benefits Permanently if They Keep Working.

The Facts: SS does have a rule, called the “earnings limit” or “earnings test” that can temporarily reduce the benefits of people who are working. The rule only covers people who claim benefits before full retirement age and continue working. In this situation, SS withholds a portion of benefits if earnings from work exceed a set cap, which changes every year and differs depending on how close one is to full retirement age.

James Wright Jr.

James Wright Jr. is the D.C. political reporter for the Washington Informer Newspaper. He has worked for the Washington AFRO-American Newspaper as a reporter, city editor and freelance writer and The Washington...

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