The 3 Most Egregious Social Security Lies You've Been Told (and May Have Even Believed)

In January, that average Social Security check for the more than 50 million retired workers collecting a monthly benefit was $1,909.01. This may not sound like much, but according to the Centers on Budget and Policy Priorities, Social Security benefits have reduced the poverty rate for seniors by nearly three quarters -- from an estimated 39% without Social Security to 10% with monthly payouts.

Social Security is unquestionably America's top retirement program, and it's a necessity to make ends meet for nearly 9 out of 10 current retirees.

Unfortunately, it's also a program that's rife with misinformation and outright lies, some of which could coerce future retirees into a disadvantageous claim. What follows are three of the most egregious Social Security lies you've been told, and might have even believed.

A businessperson holding a stack of hundred-dollar bills behind their back while crossing their fingers.

Image source: Getty Images.

Social Security lie No. 1: Congress/lawmakers stole from Social Security

Arguably the biggest Social Security lie that simply won't die on social media is the notion that Congress/lawmakers dipped their proverbial hands into Social Security's cookie jar, stole all the excess cash the program had, and used it to fund wars and other aspects of government spending. Every facet of this claim is incorrect.

Nearly 89 years ago, the Social Security Act was signed into law. Contained in that law is a provision that requires all excess cash (i.e., the revenue brought in above and beyond what was paid out in benefits and administrative fees to oversee Social Security) to be invested in special-issue government bonds.

Every month, the Social Security Administration updates its investment holdings. This update contains the dollar value of the asset reserves for the Old-Age Survivors and Insurance Trust Fund (OASI), which parses out monthly benefits to retired workers and survivor beneficiaries, as well as the Disability Insurance Trust Fund (DI), which is responsible for paying benefits to workers with disabilities. As of the end of January 2024, the combined OASI and DI had approximately $2.801 trillion in asset reserves, which were earning an average interest rate of 2.45%.

For those curious, the annually released Social Security Board of Trustees Report also publishes the program's investment holdings and provides an even more thorough breakdown of the bond maturities.

Since the program's inception, the federal government has never failed to make an interest payment to Social Security, nor has it defaulted on any of its bond maturities. Further, if the misinformed social media crowd were to get its way and Social Security's asset reserves were returned and not invested in interest-bearing government bonds, it would cost the program an estimated $68.6 billion in interest income this year alone.

Social Security's exceptionally safe bond investments are akin to going to your local bank and purchasing a certificate of deposit (CD). If you buy a $1,000 interest-bearing CD from your bank, it's not going to put your cash into a vault and let it collect dust. Rather, it's going to loan out your cash to generate interest income above and beyond what you're being paid via the CD.

Just because your bank has loaned out the money you gave them doesn't mean it's been stolen. When your CD comes due, the bank will have the capital to make you whole. The same holds true for the special-issue bonds America's top retirement program holds.

Every cent of the OASI's and DI's asset reserves is accounted for in the program's investment holdings. Congress/lawmakers haven't stolen a cent.

US Old-Age, Survivors, and Disability Insurance Trust Fund Assets at End of Year Chart

Social Security can survive in perpetuity, even if its assets reserves are exhausted. US Old-Age, Survivors, and Disability Insurance Trust Fund Assets at End of Year data by YCharts.

Social Security lie No. 2: Social Security is going bankrupt/won't be there when I retire

A second pervasive lie that continues to circulate on social media is the notion that Social Security is going bankrupt and won't be there for future generations when they retire.

According to the 2023 Social Security Board of Trustees Report, the program is staring down a $22.4 trillion (and growing) unfunded obligation through 2097. Put simply, not enough revenue will be collected over this 75-year stretch to cover outlays under the existing payout schedule, including cost-of-living adjustments (COLAs) and administrative expenses.

However, there's a big difference between survivability and sustainability. The sustainability of the current payment schedule is definitely in question. If the OASI's asset reserves are depleted by 2033, as the Trustees have predicted, retired workers and survivor beneficiaries could be looking at sweeping cuts to their Social Security checks of up to 23% to ensure no additional reductions are needed through 2097.

But there's absolutely no question that Social Security will survive. Even if the OASI's and DI's asset reserves were to be completely exhausted, the program's other two sources of funding -- the 12.4% payroll tax on earned income and the taxation of Social Security benefits -- would live on in perpetuity. Earned income accounts for wages and salary, but not investment income.

In 2022, 90.6% of the $1.222 trillion in revenue collected by Social Security came from the payroll tax, with another 4% derived from the taxation of benefits. As long as Americans continue to work and pay their taxes, money will continually stream in that can be distributed to eligible beneficiaries. Mathematically, it's impossible for Social Security to go bankrupt, given the way it's currently funded.

The only way for Social Security to become insolvent or go bankrupt would be for lawmakers to completely change how the program is funded. This would require bipartisan cooperation, which has been virtually nonexistent for Social Security legislation over the past 30 years.

While it's possible your benefit may be lower than expected when you retire, there's little doubt Social Security is here to stay.

A large American flag hanging slightly behind a barbed wire fence.

Image source: Getty Images.

Social Security lie No. 3: Social Security would be fine if they'd stop giving it to undocumented workers

The third egregious Social Security lie that you've been told and may have even believed is that Social Security's weakened financial foundation (i.e., its noted $22.4 trillion long-term funding shortfall) is the result of providing benefits to undocumented workers. The reality for the program is that net migration into the U.S. is a positive for America's top retirement program.

To begin with, Social Security relies on a steady stream of legal migration into the U.S. each year. Most migrants entering the U.S. tend to be younger, which means they'll spend decades in the labor force contributing to the program via the payroll tax before collecting a Social Security benefit of their own. The Trustees' intermediate-cost analysis (i.e., the one they believe is likeliest to occur) implies average annual net migration of 1.245 million people into the U.S. through 2097.

Unfortunately for Social Security, the number of people legally migrating into the U.S. has fallen every single year since 1998. As of 2023, the net migration rate was well below the Trustees' intermediate-cost model. In plainer English, a lack of legal migration into the U.S. is the big problem for Social Security.

Meanwhile, undocumented workers aren't collecting a cent in benefits from the traditional Social Security program -- I'm talking retired-worker benefits, survivor benefits, and disability benefits.

Interestingly enough, an analysis published in 2016 by New American Economy found that undocumented workers had contributed a total of $100 billion in revenue to the Social Security program over the prior decade without receiving any benefits in return. On average, undocumented workers have been providing roughly 1% of the annual revenue for Social Security.

One of the reasons this lie about undocumented workers "receiving Social Security" persists may have to do with people incorrectly conflating traditional Social Security and Supplemental Security Income (SSI). Although both programs are overseen by the Social Security Administration, they're funded differently.

SSI is funded with the General Fund and may, on occasion, provide income to asylum seekers. Traditional Social Security has never been part of the General Fund and generates its revenue from the payroll tax, taxation of benefits, and interest earned on its investment holdings. It also doesn't provide a cent in benefits or payments to undocumented workers.

Social Security has no shortage of problems, but undocumented workers aren't one of them.

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