About social security

I still see folks claiming that Congress “stole” Social Security, that SS is a Ponzi scheme and that SS is bankrupt or will be soon. All myths. Here are some core truths about SS that everyone needs to know.

• SS is separate from the general fund. SS doesn’t affect the federal deficit or national debt. Those who claim we must cut SS in order to balance the budget are lying;

• By law, unexpended SS taxes must be invested in US treasuries. That means that, just like your passbook savings account, the money isn’t sitting around in a box, nor has it been “stolen.” Treasuries are backed by the full faith and credit of the US government;

 

• There is no account with your SS payments in it, like your savings account or your 401k. Your SS payments were/are being used to pay the benefits of current retirees. Future taxpayers will pay for your retirement. Thus has it ever been;

 

• Your SS benefit is calculated based on the top 35 earning years. If you haven’t paid in for 35 years by the time you start collecting benefits, a zero is added in for the missing years in calculating your benefit;

 

• If you delay taking payments after “full SS,” your benefit will increase by ca. 8% per year until age 70. But you will have fewer years to enjoy the benefit, since your sell-by date won’t change. There is no optimal retirement age that fits everyone;

 

• If no changes are made in tax rates or withholding, the SS trust fund will run out in around 2032. That doesn’t mean SS is bankrupt. It means that projected benefits will drop by 20-25%. There are several ways to fix this. Raising or removing the cap would help, but if you think that means applying the payroll tax to all of Warren Buffett’s and Bill Gates’ income, you don’t understand. The top 1% get most of their annual “income” from investments, which are not subject to the payroll tax. Removing the cap on contributions while capping benefits simply turns SS into a welfare program, a favorite football of the right.

  

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