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Social Security: 1 Shocking Fact Most People Don't Know

Social Security is a key component of financial security for millions of Americans. But there's one thing that most people don't realize about Social Security, and it has huge implications for their benefits in the future.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, examines how Social Security is not a legally recognized property right and therefore can be taken away with impunity. Dan notes that most people think of themselves as being entitled to benefits, having paid taxes throughout their careers. But a 1960 Supreme Court case found that a government law taking away Social Security for citizens deported on account of being Communists was constitutional, and that precedent has been cited in numerous cases since then. From a political standpoint, it's unlikely that a massive withdrawal of benefits would happen, but it's still a danger that you should consider in your financial planning.

Make the most of Social Security while it's there
Just because Social Security could go away doesn't mean it will. Get the benefits you're entitled to by reading our brand-new free report, "Make Social Security Work Harder For You," in which our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.


Read/Post Comments (36) | Recommend This Article (117)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2014, at 5:54 PM, gadfly1000 wrote:

    "a government law taking away Social Security for citizens deported on account of being Communists was constitutional, "

    Sorry, Dan, but despite the hysterical headline you don't deport citizens.

  • Report this Comment On March 09, 2014, at 6:01 PM, yooperintx wrote:

    They can IF they are naturalized citizens and have their US citizenship revoked due to various reasons. Natural born citizens cannot be deported.

  • Report this Comment On March 09, 2014, at 6:17 PM, usfarbuo wrote:

    But and correct me if I am wrong- illegals are entitled to welfare, ebt cards and whatever else they are "entitled" to but someone who worked for 45 years or more lose their benefits. Gotta love it!

  • Report this Comment On March 09, 2014, at 6:17 PM, rayrock1 wrote:

    There’s another shocking fact. The money coming in is the money they use to pay retirees and if there is not enough coming in to cover the promised benefits then there will be an automatic across the board cut for all recipients. SS is government administered, it is not government funded and the government has no obligation to make up the shortfall.

    For decades SS took in more than it paid out and now that money is being used to cover the difference. In about 20 years that will be depleted and there will not be enough coming in to pay the promised benefits which means a cut for all recipients.

  • Report this Comment On March 09, 2014, at 6:27 PM, PragueSpring68 wrote:

    " illegals are entitled to welfare"

    Illegals such as the CEOs of Disney and Wal-Mart

    who lock the doors on the factories they make there products condemning there workers to horrible deaths when fires break out.

    Illegals such as the CEOs of Gap and other companies who make there stuff in Bangladeshi

    factories that collapse, killing thousands.

    You got that right! All those illegals make millions of corporate welfare when they should be in jail!

  • Report this Comment On March 09, 2014, at 6:44 PM, BobinKCMO wrote:

    All they have to do is raise the maximum income ceiling from the current $117,000 to $300,000 and it will be solvent for minimum 50 years! And those people that earned that much wouldn't feel a thing any more than they do now at the current $117,000 level they just think they will!

  • Report this Comment On March 09, 2014, at 7:11 PM, meeeto wrote:

    More BS from the right wing republican own liberal new media!!!

  • Report this Comment On March 09, 2014, at 7:54 PM, BL76KM81 wrote:

    I wasn't aware of the fact if you owe money to the Veteran's Adminstration they will garnish your Social Security. I wasn't aware of this until I received Social Security and didn't know I was supposed to turn over my back pay to the VA. They take $200 out of my check every month. Next stupid move. Didn't turn in the paper work for medical benefits on time. They had all the info to begin with. One of the reason's I get benefits is Anxiety. Honest to God's truth, everytime i got near that paper work, I started a panic attack, my chest got tight, having trouble catching my breath. Haphazardly got in sent in on the last day. it was denied.

  • Report this Comment On March 09, 2014, at 8:55 PM, VegasSmitty wrote:

    If any attempt were made to take away SS there wouldn't be a politician left alive in D.C.

  • Report this Comment On March 09, 2014, at 9:45 PM, vet212 wrote:

    The main trouble is that to many people who DO NOT NEED IT are collecting people with incomes yearly that run from 100's of thousands to those receiving 10's of millions. all you have to do is put your retirement into family trust with you as trustee and recipient and officially by law you have no income

  • Report this Comment On March 09, 2014, at 10:08 PM, bkmobal wrote:

    The court case was Nestor vs Fleming. The only people must be paid Social Security are the ones under Totalization Agreements. The US signed one with Mexico in 2007 but was never approved by the US Congress. Only had to work 18 months in US and the rest in Mexico to receive US payments if approved. Social Security still has the documents. Google Totalization Agreement Mexico

  • Report this Comment On March 09, 2014, at 10:12 PM, vulture6468 wrote:

    Does not matter whether trusts exist or not. There is no means testing for Social Security.

    You earn quarterly credits when you pay Social Security taxes and when you have 40 quarters and attain at least age 62 you can collect. Your benefits essentially reflect your contributions. Earn more, get more. Benefits are capped at the Social Security earnings level.

  • Report this Comment On March 09, 2014, at 10:19 PM, michaeljbauer wrote:

    So, the investment advisers at the Motley Fool have gone all Reactionary Right on is. Did the Fool Brothers read this article?

  • Report this Comment On March 09, 2014, at 10:22 PM, digital wrote:

    Define Income, the IRS does not define Income.

  • Report this Comment On March 09, 2014, at 10:35 PM, jac3510 wrote:

    "Dan notes that most people think of themselves as being entitled to benefits, having paid taxes throughout their careers."

    vs.

    "Get the benefits you're entitled to by reading our brand-new free report,"

    Now I realize that MF is on Yahoo, but do you all REALLY need to follow their (lack of) standards in editing? Sheesh. :P

  • Report this Comment On March 09, 2014, at 10:53 PM, ecos100 wrote:

    Can someone please comment on the history of

    the SS Trust Fund. I was told that it started as

    a separate Acct. from the Treasury Funds that

    come from Taxes and that later the Congress

    changed the law so that funds from SS could

    be added to the general fund used to pay the

    governments bills. I understand that the government

    OWE's retirees billions in borrowed SS investments.

    Is this accurate and If so doesn't anyone care to

    mention it in tirades that the fund is going to be

    bankrupt "someday"

  • Report this Comment On March 09, 2014, at 11:02 PM, JePonce wrote:

    It should be taken away....from government.

    The average Social Security recipient in 2012 received a monthly amount of $13,333 before Medicare deduction.

    The 2012 Poverty threshold was $11,011.

    The PPP GDP per capita in Communist Cuba was $10,200, and China was $9,828.

    Just saying.

  • Report this Comment On March 09, 2014, at 11:06 PM, JePonce wrote:

    When LBJ created the Great Society Debt, social security was a privately owned account. LBJ did not want to start paying out for the new Medicaid program for 5 years, wanting to fill the account first. But Congress wanted to begin immediately, so the ended the personal account to fund immediate payment.

  • Report this Comment On March 10, 2014, at 12:43 AM, kdavis860 wrote:

    Even if something is contractually guaranteed, it's not enforceable, as is being shown in the bankruptcy of Detroit. I would say the political will to continue having Social Security is a stronger guarantee than a contractual guarantee could be. I worry about it because too many people leech, especially on the disability part, often claiming phony disabilities, including hard-to-disprove mental illness claims. That being said, I expect it to continue to exist at least partially for a very long time.

  • Report this Comment On March 10, 2014, at 9:14 AM, JoeTheEconomist wrote:

    @ecos100,

    Social Security has always been a separate account. The excess funds of SS weren't 'added' to the general fund. They were borrowed - on better terms than your private pension gets.

    In the 1960s, SS was added to the budget. That is a reporting function, much like your 1040 to the IRS. You can include the income of your children on your 1040, but that doesn't move the money from their accounts. It is nothing more than a way to present your families income.

  • Report this Comment On March 10, 2014, at 9:23 AM, randydevinney wrote:

    When the Federal Insurance Contributions Act (FICA or Social Security) was passed it was immediately challenged in the Supreme Court. As an insurance program, it violated the tenth amendment since it was not specifically provided for in the constitution. It was defended as being a welfare program, and was allowed under the common welfare clause in the preamble. Social Security is a welfare program and can be taken away. More likely it would be modified to apply only to the needy, and gradually taken from people above a certain income or savings level.

  • Report this Comment On March 10, 2014, at 9:31 AM, gadfly1000 wrote:

    yooperintx,

    Yes, but Nestor is identified as an alien in the case.

  • Report this Comment On March 10, 2014, at 10:01 AM, honeybunnie wrote:

    I DIDNT SEE A POST OF THE US GOVERMENT SPENIG OF SOCIAL SECURITY TRUST FUNDS. ITS A FACT THAT SINCE THE VEITNAM, WAY CONGRESS HAS BEEN RAIDING THE TRUST FUND...AOUT $300 MILLION A YEAR.. THE BROWED MONEY GOES INTO THE NATIONAL DEBT.SO IN EFFECT NOTHING IS BEING PAID BUT THE INSTEREST. TO THIS DATE I WONDER IF THEY ARE STILL RAIDING OUR RETIERMENT FUNDS.. MOST LIKEY YES....

    SEEM'S THE CONGRESS LOVE SPENING SOME ONE ELSE'S MONIES...

  • Report this Comment On March 10, 2014, at 10:04 AM, bkmobal wrote:
  • Report this Comment On March 10, 2014, at 10:19 AM, Heidikitty wrote:

    I do not trust the government a bit more than I could fly to the moon.

    What is the least amount of money you have to contribute to have Motley Fool handle your money and considering someone could possibly have to get the rewards before 5 years?

  • Report this Comment On March 10, 2014, at 10:58 AM, TMFGalagan wrote:

    A note to everyone who got sidetracked on the facts of the Supreme Court case: the Court has used that case as precedent in denying challenges to much broader changes to Social Security. The important general holding in the case is that Social Security is not a property right for anyone, and so changes can be made without it being considered a taking or triggering specific due process requirements.

    best,

    dan (TMFGalagan)

  • Report this Comment On March 10, 2014, at 11:50 AM, michaelmar wrote:

    The govt has no need to reduce the benefits ever. All they have to do is print money and pay off the obligation in worth-less dollars as they have been for years.

    Social Security has no cash of its' own...all it has is IOU's from the Federal govt, who has been living on the surplus loans from SS for current obligations (try that in a business or in your personal life and see how that works out in the long run). When the amount coming in to SS is less than that amount going out ( a few short years from now), those IOU's will come due, requiring either a large Income tax increases to pay back SS, a large SS tax increase, lower benefits, or simply print money out of thin air to pay SS...anyone care to bet on which our illustrious ( a polite euphemism for chicken sh_t) politicians will chose?

  • Report this Comment On March 10, 2014, at 1:50 PM, skipgainer61 wrote:

    If the federal government touches our SS benefits it would not survive much longer after they take our money

  • Report this Comment On March 10, 2014, at 3:50 PM, clloyd53 wrote:

    What some do not realize is that immigration pollicies being debated now will be the final nail in the Social Security coffin. Citizenship for illegals would make well over a million immigrants immediately eligible for retirement. And about the same number eligible for Social Security Disability. And twice that number eligible for Social Security Supplemental income. The only way to save these programs would be for the Federal government and State government to raise taxes substantially. And those that have paid into the system will have to suffer cutbacks because of the flood of people that have paid little or none. This is especially threatening at a time when the government is talking about a 30% minimum wage increase. That will be shadowed with a cost of living increase. So at a time that the cost of living is rising substantially. Those that need Social Security to survive will have their benefits shrinking.

  • Report this Comment On March 10, 2014, at 3:54 PM, shooter9mm wrote:

    You asked. SS was in a so called lockbox until a DEMOCRAT decided to pander to the minorities for their vote. So Lyndon B. Johnson back in 1968 put in ON BUDGET to finance his Great Society (Welfare State). Both parties have STOLEN it since then to cover up their budgets. And with the, I believe 16 Trillion stolen we have more Poor (?) people then back then. We need Charter Schools & discipline, not HANDOUTS & teach the American people to WORK for their freaking money as the Bible states, not STEAL it, like our government from hard working taxpayers. Who eventually will also STOP working as their tax burden gets bigger

  • Report this Comment On March 10, 2014, at 4:03 PM, NASI wrote:

    The National Academy of Social Insurance has a wealth of resources regarding when to claim social security. Here's a recently released youtube video that may be of interest to everyone: http://bit.ly/PaysToWait

  • Report this Comment On March 10, 2014, at 6:14 PM, nanja wrote:

    You say that having paid taxes throughout the years does not entitle us to SS. The fact is that we not only pay taxes, but we are specifically paying INTO the SS fund for our own future, or plainly put we are setting aside our own money towards SS. This is not something given to us free and clear. Those who have not paid into SS do not get it, so let's be clear on this. Those who had their SS taken away were NOT NATURAL BORN AMERICAN CITIZENS. A natural born American citizen can be a communist, socialist, etc., whatever they feel like it. This will NOT TAKE AWAY THEIR BENEFITS. You tried to mix apple with pears, and your article is grossly misleading.

  • Report this Comment On March 10, 2014, at 7:33 PM, SellHighest wrote:

    @JePonce That is the annual amount, not monthly.

  • Report this Comment On March 10, 2014, at 7:38 PM, SellHighest wrote:

    Every American should read this. Here is the original pamphlet detailing the promises of the original Social Security Act:

    http://www.crystalbull.com/Social-Security-ISC9/

    Educational, to say the least...

  • Report this Comment On March 11, 2014, at 12:09 AM, Burstedbladder wrote:

    IMO, people with felony records (pedophiles, bank robbers, murderers, etc) should not be entitled to SS or VA benefits ever.

  • Report this Comment On March 11, 2014, at 1:10 AM, charlessgold wrote:

    our SS benefits will soon be reduced,because it is going broke,

    If you go into any SS Admin. office, you will see young and old non-citizens applying for benefits under many of the social security programs. these non-citizens know more about SS, and have already be coached how to apply to get free money.

    YOU CAN GET MORE BENEFITS IF YOU ARE A NONCITIZEN, THAN IF YOU ARE A U.S.CITIZEN.

    MAYBE WE SHOULD GO OUT OF THE COUNTRY AND COME IN AS A FOREIGNER FROM ASIA OR A MUSLIM COUNTRY COUNTRY. MANY COLLECT FREE BENEFITS WHICH EXCEED THE AVERAGE MONTHLY BENEFITS PAID BY SS.

    WHICH IS APPROX, $1200. PER MO.

    PEOPLE ON SSI OR WELFARE GET MORE THAN

    THOSE WHO HAVE WORKED ALL THE LIFE.

    THIS IS A DISGRACE. THE SS SYSTEM IS FULL OF FRAUD. IT NEEDS TO BE REFORMED .

    REDETERMINATION MUST BE MANDATORY EACH 36 MONTHS.

    MANY ON SSI AND MENTAL HEALTH AND WELFARE ARE CHEATING THE SYSTEM, JUST LIKE FOOD STAMPS.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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