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Myth vs. Fact in Social Security

Social Security has a rich and storied history in the United States, ranging from its creation as a way to bring Americans out of the Great Depression to its current status as a strained financial lifeline.  Here, we examine some of the more popular myths that surround the Social Security Administration (SSA) and whether any parts of them are actually true. 

President Roosevelt promised that participation in Social Security would be voluntary. 

Fact: No. When Social Security was created in the 1930s, it was designed to be funded by Federal Insurance Contributions Act (FICA) taxes.  These taxes are taken out of the payroll of employees who work in jobs covered by Social Security; therefore, if you did not work in a Social Security-covered job, you could not collect Social Security benefits once you retired.  Paying FICA taxes may have seemed voluntary initially because only about half the jobs in the American economy were covered by Social Security when the SSA was created, so many people never paid these taxes. 

Members of Congress do not pay into Social Security. 

Fact: No. As of 1984, all members of Congress must pay into the program. 

Illegal immigrants can collect Social Security.

Fact: No. Although citizenship is not required, not being a citizen is not the same thing as being an illegal immigrant.  Immigrants must be lawfully present in the United States and pay into the system for at least ten years, the same as United States citizens must.  If an immigrant does not obtain proper work authorization, his or her wages cannot be covered by Social Security and will not contribute to future retirement benefits. 

Social Security benefits are an earned right. 

Fact: No. Social Security payments are not guaranteed, and Congress can change the laws that govern the program at any time to impact what you will receive in benefits, if anything. 

The United States government raided the Social Security Trust Fund. 

Fact: No. The Trust Fund is separate and distinct from the government’s general fund, and the government always uses incoming revenue in FICA taxes to meet its payment obligations before it borrows money.   

Everyone should wait until age 70 to start collecting retirement benefits. 

Fact: Not necessarily. If you are 62 years old or have reached full retirement age and need money immediately, you should start collecting retirement benefits.  Similarly, if you are in poor health, or your family does not have a history of longevity, you might be better served by collecting benefits as soon as possible. 

Social Security is going bankrupt. 

Fact: Not quite. The worker-to-retiree ratio is changing in America, and the current workforce cannot support the number of people retiring.  Therefore, at some point in 2020, there will not be enough money coming into Social Security to pay out 100% of benefits to every retiree claiming them.  That does not mean that Social Security is bankrupt, since as long as there are employed Americans working for jobs covered by the SSA, there will be money to distribute to retired workers.  What it does mean, however, is that Social Security will have to start borrowing money from the Social Security Trust Fund to make up the difference.  Once they do that, the Trust Fund is expected to be depleted by 2035.  At that point, Social Security will only be able to pay retirees 75% of what they are entitled to, and that percentage will steadily decrease over time.  Alternatively, Congress could increase FICA tax withholdings to make up the difference.