Common Myths about Social Security Benefits Debunked

Introduction

Few people have never heard of Social Security, and despite its complexity, the basics of Social Security are relatively easy to understand. Simply put, Social Security is the common term for the Old-Age, Survivors and Disability Insurance program in the United States and is financed through payroll taxes. It is a federal program that provides retirement benefits, survivor benefits and disability income to qualified people.

Myth #1: Social Security Benefits are only for retirees

A common myth is that Social Security benefits are for retirees only. While most of the focus of Social Security is on retirement benefits, it’s easy to forget its original intent, that of insurance for “old-age” people, survivors and those with disabilities.

Retirement benefits are based on an individual’s average indexed monthly earnings (AIME) and the number of years they worked and paid into the Social Security system. Individuals can start receiving retirement benefits as early as age 62, but the amount they receive will be reduced if they start before full retirement age (which ranges from 66 to 67, depending on the individual’s birth year). Individuals can delay receiving benefits until age 70, which will increase the amount they receive each month.

Those unable to work due to a disability and who meet certain criteria can receive Social Security Disability Insurance (SSDI) benefits. The amount is based on the individual’s work history and AIME. Family members of disabled individuals, such as children or spouses, may also be eligible for benefits.

Survivors of deceased individuals who worked and paid into the Social Security system may be eligible for survivor benefits. Eligibility and benefit amounts depend on the individual’s work history and AIME, as well as the relationship of the survivor to the deceased individual.

Myth #2: Social Security Benefits will be enough to cover all expenses

The average monthly Social Security benefit amount in 2023 is $1,693, an amount not likely to cover all monthly expenses. The amount is calculated based on an individual’s highest 35 years of earnings, adjusting the earnings for inflation and then averaging. Inflation can undermine the purchasing power of benefits over time, and healthcare expenses are often a heavy financial burden for retirees.

A Cost-of-Living-Adjustment (COLA) is an increase in Social Security income to help individuals keep pace with the cost of living. According to the Social Security Administration, Americans on Social Security received an 8.7 percent COLA increase this year.

Myth #3: Social Security is going bankrupt

Experts predict that Social Security trust funds could be depleted by the mid-2030s if legislative changes aren’t made soon. To maintain solvency, lawmakers have proposed such changes as raising the retirement age, reducing benefits for high-income earners and increasing payroll taxes. According to the Congressional Research Service (CRS), despite the predicted financial difficulties with Social Security, beneficiaries will still be legally entitled to their full benefits; however, the Antideficiency Act, which is legislation designed to prevent expenditures in excess of what’s available in a particular appropriation, prohibits government spending in excess of available funds, so Social Security would not have the legal authority to pay benefits on time. While that sounds alarming, workers are still paying their payroll taxes and policymakers have the time too perfect the aforementioned changes. Social Security benefits are an important source of retirement income for many Americans, so it’s important to understand how the program works and how changes could impact benefits, but it’s also important to note that it takes planning and commitment to realize financial security in retirement.

Myth #4: Social Security Benefits are only for U.S.  citizens

To be eligible for Social Security benefits, individuals must be U.S. citizens or lawful residents who have paid into the Social Security system for a certain number of years.

Non-citizens who are in the U.S. legally and have paid into the Social Security system may be eligible for benefits.  Additionally, non-citizens who live outside the U.S. may be eligible for benefits if they meet certain criteria, such as having worked in the U.S. for a certain number of years.

Myth #5: Social Security is a welfare program

Social Security benefits are paid for by you.  They are funded through payroll taxes paid by you and your employer.  According to the Social Security Administration, the term “social security” originated in 1935 during the Great Depression when the Social Security Act was passed.  It was at that time the term became synonymous with “social welfare,” likely because of the economic situation and the advent of this law designed to provide financial assistance on the basis of need.  While traditional welfare programs, administered by county departments of Social Services, are needs-based and funded through general tax revenue, Social Security benefits are not needs-based and are calculated based on work history and average indexed monthly earnings.  Bonus: Social Security benefits are not subject to most state income tax.

Conclusion  

Social Security is not a welfare program, its benefits are for U.S. retirees (and lawful U.S. residents), and was paid for by you with each paycheck you earned.  Social Security is also for those unable to work due to certain disabilities or illness, and while it is a primary source of income, it may not be enough to cover all expenses.  Many fear it won’t be in existence by the time they need it, but lawmakers are working for positive change.   

We live in a world of information at our fingertips, we can dial it up, punch it up, and simply click it up, but much of it ends up skewed if not completely untrue.  With a vast number of sources disseminating their interpretations of important facts, it’s no wonder misinformation is so prevlaent.  With regard to Social Secuirty, the best source of information is a social security expert.  Visit the Social Security Administration’s website or contact your local Social Security office.