Dispelling the Greatest Social Security Myth of All Time

By and large, there are few greater investing enigmas than Social Security.

Ask most people, and they'll tell you that they expect to be paid "something" from the Social Security Fund when they retire. But, ask them how Social Security is directly affecting them now, or how much they plan to rely on Social Security in their later years, and you're liable to get a "deer in the headlights" look in return.

The general observation is that the older you are, the more likely you are to have had a monetary benefit from Social Security. As a CNN/ORC International poll noted in 2011, 85% of people aged 65 or higher reported a good effect from Social Security compared to 62% of 18- to 34-year-olds which reported no effect whatsoever. The end result is that Social Security is somewhat well understood by seniors, while it remains a head-scratcher for most everyone else.

However, if you ask practically any age group, they'll tell you that the Social Security Trust Fund is in trouble. This same CNN/ORC International poll notes that between 57% and 82% of all age groups respondents believed the Social Security System was in "crisis" or had a "major problem." In other words, the fund is already paying out more money than is coming in, which threatens the sustainability of Social Security disbursements.

Source: Social Security Administration

Social Security's problems, in a nutshell
"What's causing this problem?" you ask.

The primary culprit is a massive demographic shift whereby the lower-birth-rate generation begins to replace the baby-boomer generation. With fewer workers and a rising number of baby-boomer beneficiaries, the worker-to-beneficiary ratio is expected to fall to as low as 2 by 2035, according to the Social Security Administration. Fewer workers and more qualifying for benefits certainly creates a cash flow problem.

In addition, there's the simple fact that we're living longer because of improvements in health care, as well as increasing education from the Centers for Disease Control and Prevention regarding our nation's top killers, such as heart disease and cancer. If people are living longer, it means a greater length of time they'll be able to collect Social Security benefits, further draining the fund.

Source:, Flickr.

The greatest Social Security myth of all
These concerns have manifested into the notion that sometime by the mid-2030s the Social Security Fund will be bankrupt and future generations will simply be left to fend for themselves. This is, without question, the greatest Social Security myth of them all.

The simple notion that the Social Security Trust will be bankrupt by 2033-2037 is so blatantly incorrect it's not even funny. Based on the current projections from the Congressional Budget Office and the Social Security Administration, the reserve fund will be out of money by 2033 or 2037, depending on your source. However, income will still be coming in via workers' paychecks.

What this means is that the Social Security Trust Fund, without doing anything more than lowering payout benefits from 100% to 75%, could extend those benefits to citizens through 2087. That's right ... dropping benefits just 25%, even with increasing longevity, a smaller workforce, and a huge number of boomer retirees could yield another 50 to 54 years of viability before more minor cuts may again be needed.

So relax, younger generation: Social Security looks as if it should be there for you when you're ready to retire. Of course, that doesn't mean you shouldn't consider taking a few steps to help improve your chances of a comfortable retirement.

Consider taking these steps
Although you can't do a whole lot to stop a major generational shift, you can take specific steps that will increase your payout when you do retire.

For example, waiting as long as possible to take your Social Security disbursements will increase the amount you're eventually paid out. According to, a person who begins taking Social Security distributions at age 70 will receive 76% more than an individual who begins taking their disbursement when they're first eligible at age 62. If you can comfortably live off your retirement accounts until age 70, then this could be a smart move.

Another big factor is paying into the system. Even though you need to earn only $4,640 over 10 years to qualify for some form of SSA benefits, your SSA benefits are determined by averaging your 35 highest-earning years. This means someone who works 25 years and then retires or stops working is going to have the SSA average in 10 zeroes into their eventual benefit disbursements. Put simply, if you can work a full 35 years, do it!

Lastly, don't wait till it's too late to start an individual retirement account. For the younger generation, a Roth IRA can be a particularly powerful tool that could provide more than enough income to allow them to push their Social Security disbursements to age 70. Roth IRAs allow investments to grow completely tax-free as long as no disbursements are taken before age 59 1/2, so it likely represents a smart money move for people currently under age 50.

You can also increase your retirement income through other means: dividends. You can find some of the best by reading this report.

Read/Post Comments (51) | Recommend This Article (24)

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 May 24, 2014, at 7:30 AM, jabez1 wrote:

    I am glad I read this. I thought that if I could not make payments due I would be in trouble. What a relief. All I have to do is just lower them to whatever is comfortable for me.

    Also I am glad to hear that 25% is minor cut.

    I think I will only pay 75% of my taxes, insurance premiums, loan payments, etc. from here on out.

    Instead of minimum wage lets just pass maximum payment legislation.

  • Report this Comment On May 24, 2014, at 8:25 AM, JoeTheEconomist wrote:

    Great Sean. You are saying that going bankrupt is a myth by admitting that it is going insolvent. What you fail to mention is that we only get 77% provided that future workers are willing to pay the taxes that we aren't.

    So it is ... No worries your kids will pick up the tab.

    Just genius.

  • Report this Comment On May 24, 2014, at 8:42 AM, cnc31us2002 wrote:

    the young have been brainwashed by the right so that the rich backers of the right could privatize social security..also....I know of so many, mainly men, who die in their fifties after contributing at least 30 years to social security. the roosevelt program is factually the most successful public program in human history and the right wing billionaires want it for themselves.

  • Report this Comment On May 24, 2014, at 8:54 AM, Gepetto100 wrote:

    Your kids have always picked up the tab. I am picking up the tab for my parents right now. How do you think SS works, Joe?

  • Report this Comment On May 24, 2014, at 8:58 AM, rbenson951 wrote:

    Yeah if I'm squeaking by on my $20,000/Year SS benefit I'm sure taking it down to $15,000 would be no biggy. Thanks for busting that myth - I feel so much better.

  • Report this Comment On May 24, 2014, at 9:16 AM, JoeTheEconomist wrote:


    "Your kids have always picked up the tab"

    Actually that is not historically true. For the first 45 years, Social Security was systemically underfunded resulting in insolvency In 1983. The system was insolvent, implying that the children didn't pay for the parents. Taxes were raised on the late boomers and Gen-Xer to pay for their parents, grandparents, and great-grandparents. The idea that one generation pays for the one before is a bigger myth than what Sean is talking about.

  • Report this Comment On May 24, 2014, at 9:54 AM, foolsall wrote:

    Big omission! The Political Factor! Paul Ryan & his Flock of RW Wacko Birds; are, expected to come after Social Security, Medicare, and Medicaid - - with Guns Blazing! About 91%, of Budgeted Entitlements, going to Seniors. If GOP is consistent with their newly adopted philosophy, promo-gated, by the now, Late, Great, Ayn Rand, who believed that, "he who cannot work; shall not eat!"

    Seniors are much like our Veterans. Once, "Spent;" they are of little use to the RW GOP. Shelf Life has expired. Parasites are liabilities. Romney's Class of the 47%; expected, to grow considerably.

    Wouldn't be so sure that your alleged Myth - - is ALL Myth!

  • Report this Comment On May 24, 2014, at 10:27 AM, calabria2014 wrote:

    @cnc31 This article is a myth in itself. Consider that the average SS check is $1200/month. Reducing it by 25% means you lose $300/month every month for the rest of your life. You cite knowing men who have died in thier 50's --who got the money they put into the system??? Why in the world would anyone voluntarily give ther hard earned wages to people in Washington with little hope of getting it back? You rail against privatization but how do you plan on getting that $300/month back from congress?? At least with a private account you have a 50-50 chance. SS is a failure of epic proportions. If it was a success (and it was for those who got in on the ground floor like my father) this article would not have been written. BTW, you could call it a success as Dan coats has done. All you have to do when you start collecting is get sick to the tune of an average of $50,000/year(Medicare) for ten years and you will then come out ahead

  • Report this Comment On May 24, 2014, at 10:28 AM, doublecheck wrote:

    The following was published in my local paper on 12/9/12:

    No looming bankruptcy for Social Security

    By "doublecheck"

    During 2011 the Social Security Trust Fund paid out $735 billion in benefits for Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). Revenues amounted to $804 billion. The Trust Fund ended the year with a balance (Social Security assets only) of $2,677 billion (+$2.5 trillion). Clearly expenses were less than income and the Trust Fund made a "profit." Despite the fact that the employee portion of Social Security taxes had been reduced from 6.2 percent to 4.2 percent (an average saving to taxpayers from $300 to $2,000 per year).

    Why then all the gloom and doom about "Social Security running out of money?" We can no longer afford these "entitlements," is heard, as if "entitlement" is a dirty word. But they are "entitlements," because people have a right to the benefits. We paid for it and now we're entitled to the distribution. It is not a matter of what we can afford. It is a matter of what we (all of us, as a Nation) have promised and are obligated to deliver. There's no wiggle room there. Or do you propose we renege on the promises made to our retirees?

    If so, why do we not also renege on the National Debt and all our international Pacts and promises. What will that do to the "full faith and credit" of the USA? If we cannot (or will not) keep the promises to our own people, why should the world expect us to keep our promises in other areas. To name just a few items that could go by the wayside: NATO, OAS, ANZUS, UN, various non-proliferation agreements, commitments to Israel, etc. etc. But most of all we will loose our self-respect and the respect of the world. No longer will the USA be a shining beacon to the world. And all because "we can no longer afford" to take care of our retirees.

    What is next? Abolish the Veterans Administration and leave our Veterans (for whom we do not nearly enough) fend for themselves altogether? Abolish Medicare and Medicaid and let our people die?

    But what is the outlook for future Social Security costs in relation to GDP, according to the Trustees? They like to juggle with "percentages of GDP," rather than actual dollars and that distorts the picture. For instance if we accept that costs increase to 6.4 percent of GDP (as the Trustees predict) in 2035, what does that mean in real dollars?

    What will the GDP be in 2035? The USA has the largest and most technologically powerful economy in the world, with current GDP at +$15 trillion. But the GDP is not a static number. Next year it is likely to be higher and for all we know it may have doubled by 2035. At a very conservative growth factor (less than one percent/year), the GDP will be at least $20 trillion in 2035. Social Security costs in 2011 were 4.9 percent of GDP at $15 trillion. That is $735 billion. According to the Trustees, the projected costs for Social Security will be 6.4 percent of $20 trillion. And that amounts to total Social Security costs of $960 billion (just short of a trillion) in 2035. Again, according to the Trustees, costs will then decline to 6.1 percent of GDP by 2055 and remain at that level to at least 2086.

    But if you are still worried about the "viability" of the Social Security program, there are two relatively easy solutions. Right now Social Security taxes (revenues) are 6.2 percent on the first $106,800 of income (the so-called "income cap"). To make Social Security permanently viable we don't have to make draconian cuts as is required by "sequestration." Just raise the tax to 6.5 percent (a .3 percent increase) and/or raise, or eliminate the "income cap." It's just arithmetic.

  • Report this Comment On May 24, 2014, at 10:31 AM, BrilliantDumbass wrote:

    Let's raise the earned income threshold to a million and also make the Capitol Hill leaches have to depend on SS. It will get fixed then not to mention some decent raises.

  • Report this Comment On May 24, 2014, at 10:47 AM, sabebrush6 wrote:

    1. .Keeping politicians out of the Social Security funds would be a GIANT improvement.

    2. Not allowing every Jose, Ricardo & Hamas to collect SS funds that never contributed would be a GIANT improvement.

    3. Using Social Security only for what it was meant for would be a GIANT improvement.

  • Report this Comment On May 24, 2014, at 11:06 AM, Rich3067 wrote:

    Amen to Brilliant but my idea is to remove the threshold altogether. I have always worked and I never made enough to enjoy the threshold. SS and Medicare are brutal taxes meaning there is no exemption, credits or deductions so most of us just pay in week after week. You would think the right would jump on this idea as this is very close to the flat tax they always speak of. Privatize SS would be a disaster. People will make poor investment decisions, they will hire people to "help make poor investment decisions", early withdrawal and end up retiring with nothing. Our nation will not let them starve to death so it will just add to the welfare rolls. Leave it as it is with one exception, everyone pays in and when they receive their payment there will still be a max.

  • Report this Comment On May 24, 2014, at 11:06 AM, rav55 wrote:

    Social Security could also solve the problem as well as raise the benefit payout by simply increasing the tax ceiling or hey better yet, how about if ALL Americans PAID EQUALLY regardless of income into the fund. But the Paul Ryan BILLIONAIRE crowd would start crying poverty so that would never fly.

    Social Security is supported by the middle class.

  • Report this Comment On May 24, 2014, at 11:09 AM, altha2008 wrote:

    I started one for my two grandkids ages when they was born. They are 4 and 5 now

    Started $100.00 each per year in Tax lien certificates. Now each have over $800.00 in their accounts. it will double every 4 years.

    My niece has a lot that we use her money on a tax deed sale. When we get it rented, the lot will bring $250.00 per month income toward her retirement.

    we put in in a Trust so they cannot touch it until they are 50 years old. They cannot borrow against it or nothing.

  • Report this Comment On May 24, 2014, at 11:20 AM, doublecheck wrote:

    An answer to "sabebrush6"

    Neither immigrants nor anyone else (nor every Jose, Ricardo & Hamas) is able to collect Social Security benefits without someone paying Social Security payroll taxes into the system. The confusion probably comes from misunderstanding a program called Supplemental Security Income (SSI), an initiative from the Nixon Administration (1972). It is a federal welfare program and no contributions from anyone are required for eligibility. For more information on this and other Social Security myths, check:

  • Report this Comment On May 24, 2014, at 11:35 AM, Boston11 wrote:

    So they want to take 25% of the whopping $850 a month I get from SSDI.Meantime the want to raise the minimum wage to $15. So that will make my now$575 a month worth $200 a month. That makes perfect cents (pun) to me

  • Report this Comment On May 24, 2014, at 11:46 AM, hs321 wrote:

    One part of the problem is that part of what is considered funds in SS Trust Fund is the government paying back the money it "borrowed".

    It's not just that SS has over ~$7 TRILLION in long-term unfunded liabilities, Medicare has over $25 TRILLION in long-term unfunded liabilities and when you throw in numbers that are by law not considered in the nations official debts, such as government pensions, the total bill is conservatively estimated to be over $60 TRILLION and some estimate over $80. And if you really want to get your socks knocked off with a big number, check this out:

    Interesting people are worried about the measly SS being bankrupt when in fact the entire nation could go bankrupt under the right circumstances.

  • Report this Comment On May 24, 2014, at 11:57 AM, wateaman wrote:

    And nobody mentions inflation? What will a 2014 dollar be worth in 2033? 25 cents? Will we still be printing money to the tune of nearly a trillion a year to "keep inflation low" by then? So my 25 cents takes a 23% hit. Now I'm down to 19 cents worth of income? Or will SS payments be increased 10% a year when we get back to 80s inflation rates? Ha ha.

    Sean, this IS an amusing article.

  • Report this Comment On May 24, 2014, at 12:06 PM, ManuelFernandez wrote:

    The truth can be found at Dow.

    The truth is that Social Security and Medicare will remain solvent thru 2087 and beyond without reducing benefits or increasing taxes.

    The special interests have been successful in manipulating the forecast with high annual CPI increases and high number of beneficiaries not supported by the FED and the Census Bureau.

    Please read the article and then become active to stop this disaster facing the retirement security of all Americans by helping to spread the truth..

  • Report this Comment On May 24, 2014, at 12:08 PM, Blknblue wrote:

    I'm amazed at the spin that is always put on by liberals. And yes I called the author a liberal. He wants to promote the idea government is fine no worries. The dates cited along with the 75% indeed show in the report. Along with several assumptions made to make that happen such as no increase in life expectancy. The cross over date where more money is spent than taken in happened in 2010. So the idea of no worries when the fund is "exhausted" is fantasy. I suggest you read the Citizens Guide to US Economy put out by the Dept of the Treasury. Very clear details on the entire debt situation. What he fails to reveal is the nature of the "trust fund". There is not some pile of money waiting to be drawn on. Any money that is not paid out is called a "surplus" and is loaned to the federal government. And the money owed by the government is treated the same as money in the bank. A government that is borrowing money everyday to keep operating. The report clearly shows the $17 trillion in debt we have. It shows the historically low interest on the debt we pay now that eats 1/2 trillion now. It also shows how the core size of government continues to grow every year. To not go to long read the report yourself that clearly states over and over the path we are on is unsustainable. If you want to trust what is on paper only then relax. If you want to look at reality know the future of Social Security is directly tied to the federal debt and the governments ability to pay it all back

  • Report this Comment On May 24, 2014, at 12:25 PM, e400 wrote:


    Living wages affords extras = healthy business = healthy money markets = permanent surplus. Spray hose up. Government deficits proves low wages are paid, or there would not be deficits ever, at all. A mean king who has a gold pit the size of Asia, but pays low wages, will still have a terrible economy, yet he will be able to pay his bills. Big business that makes good money overseas, is similar. Only raising incomes will cure this economy. A real gov. stimulus helps business pay affording incomes, -- includes getting costs off of people. We never have had 100% spender ability; profits will be profound when we do. …Raising interest rates to stop a housing bubble; nonsense. Causes stagflation, -- peculiar inflationary trends. Rate of return is interest rates only. Must stay at same low fair rate. They always make it easier to get a loan in a bad economy, or the housing market will have no spenders. They are supposed to give loans out only to those who can afford actually, and only at appraisal value that is actually real. …The communists never paid living wages; Franklin Roosevelt did; and this is only why we ever had a decent economy reasonably so, ever. we note moral people do believe average IQ people for instance, do deserve to afford to eat out on what they make also.

  • Report this Comment On May 24, 2014, at 12:35 PM, george373 wrote:

    you say be respectful than show respect.

    cut 25% would save money. fine, make SS tax free

    from both fed and state taxes. that should help everyone.

  • Report this Comment On May 24, 2014, at 12:43 PM, JFkaminski wrote:

    This is completely wrong. The fact is there is almost 4 trillion owed to the social security fund. Taken illegally singe 1987 by government and diverted to Other programs . The loss in interest revenue as a result has dismantled the whole principle by which the fund is suppose to self perpetuate and cover growing costs. The fund interest cash reserve has been depleted and it is those reserves that were the basis for how the fund income was to expand at a faster rate than expenditures. This is why it was called insurance. It works on the same principle as a life insurance policy. But the government has yet again stolen all those cash reserves and destroyed the whole basis of interest growth to the fund. It is a lot more than just 4 trillion dollars, it is the 4 trillion plus the quarterly interest that is lost. The US government is nothing more than a bunch of thugs just like the Mafia who stole from the teamsters pension funds. Just like corporate raiders who raid corporate pension funds , and cause the funds to become insolvent and unable to meet expectations without the cash generating reserves deposits it is suppose to have. This is not the first time the government has done this. IT was the same thing that caused the social security overhaul in the 80's under regan. The whole reason they let it go unchecked is they have put IOU's in the GOA vault. real paper IOU's . Now what they will do is, proclaim they need to overhaul and refund the system. They will cut benefits and end programs and in the process they will write at the very end of the BILL to do it, " ALL IOU's are forgiven" that is exactly what they will do, they will forgive themselves of the debt the OWE, that is Stolen from the people who paid it in. They did it before and they will do it again. Every last one of them belongs in prison, and should be put before firing squads.

  • Report this Comment On May 24, 2014, at 12:59 PM, Azbill007 wrote:

    An ideal scenario for future retirees. Payments going down by 25% and inflation going up. Sounds like it couldn't be a better situation if it was planned that way!

  • Report this Comment On May 24, 2014, at 1:07 PM, rowlandw123 wrote:

    1) Eliminate the wage-base cap! Use the extra revenue to make the program actuarially sound and then return any remainder to the beneficiaries.

    2) Do not tax SS income. This will encourage people to continue working. As they work they continue contributing to the program.

    3) Adjust the benefits eligibility age based on worker-to-beneficiary ratio - a bit later during low ratios, a bit sooner if the ratio increases. This will encourage some poeple to continue working (and contributing) during low-ratio periods.

  • Report this Comment On May 24, 2014, at 1:21 PM, Punky2014 wrote:

    Everything I read talks about the burden that the aging boomers will take on drawing social security down to extinction. Well, if that reasoning is going to be used, then there should definitely be a huge surplus in the ss fund now from all the income brought in by al those many boomers who've been working for the last 30-50 years. Right???

  • Report this Comment On May 24, 2014, at 2:02 PM, doublecheck wrote:

    An answer of sorts to hs321,Blknblue, JFkaminski, rowland123 and others.

    With the utmost respect, I'm amazed at the amount of misinformation that is accepted as fact. To answer some of your statements in no particular order:

    The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

    Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself

    I am on Social Security and I do not pay taxes on that. I don't make enough money to be taxed. Whatever taxes are withheld from my part-time job, are refunded in full after I file my income tax report.

    Originally, Social Security benefits were not taxable income. This was not, however, a provision of the law, nor anything that President Roosevelt did or could have "promised." It was the result of a series of administrative rulings issued by the Treasury Department in the early years of the program.

    In 1983 Congress changed the law by specifically authorizing the taxation of Social Security benefits. This was part of the 1983 Amendments, and this law overrode the earlier administrative rulings from the Treasury Department.

    The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote.

    The basic rule put in place was that up to 50% of Social Security benefits could be added to taxable income, if the taxpayer's total income exceeded certain thresholds. (Repeat: if the taxpayer's total income exceeded certain thresholds.)

    In 1993, legislation was enacted which had the effect of increasing the tax put in place under the 1983 law. It raised from 50% to 85% the portion of Social Security benefits subject to taxation; but the increased percentage only applied to "higher income" beneficiaries. Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income. (Repeat: depending on their overall taxable income.)

    Finally, both Social Security and Medicare have their own revenue streams and are NOT dependent on the revenues generated by Federal income taxes, State taxes, local taxes, or whatever taxes. Both programs are fully funded by Social Security taxes and Medicare taxes.

    I hope this helps.

  • Report this Comment On May 24, 2014, at 2:16 PM, voxchaos wrote:

    Ok, pay attention, I'm only going to say this once. The boomers are beginning to die off. I'm one of them, 68, and am loosing high school friends left and right. Out of a class of 640, 200 are already dead. In another 15 to 20 years there will be no boomers left to "drain" social security. Everybody forgets this and thinks all of the boomers will be collecting 30 years from now.

  • Report this Comment On May 24, 2014, at 2:46 PM, rw93003 wrote:

    This article is completely wrong. The only problem with Social Security is that it is a defined benefit retirement plan that should have invested all employee and employer contributions into a trust fund for the benefit of future recipients. Had they done that Social Security would not only be solvent but the benefit amounts could be greatly increased. Any defined benefit plan that is administered on a pay-as-you go basis (paying current retirees with current employee's money) must go broke. Pay-as-you-go is just the long way of saying Ponzi scheme--it will always collapse because there are not an infinite number of new "suckers" to pay for the old "suckers"

  • Report this Comment On May 24, 2014, at 2:56 PM, devoish wrote:

    Ultimately the problem is low wages. Low wages prevent savings. Low enrich investors and CEOs.

    If minimum wage growth had kept pace with worker productivity, then todays 3.6 million 'at or below the Federal minimum wage' workers would have contributed $6,514,559,982. more into SSI than they actually did in the year 2012 alone.

    If minimum wage growth had kept pace with worker productivity every minimum wage worker since 1968 would have contributed more into SSI than they actually have for the last 44 years.

    If minimum wage growth had kept pace with worker productivity, we would not be talking about saving Social Security, or raising the retirement age. We would be talking about retiring at 50 and lowering the cap on taxable income and the SSI "safety net" would be a steel reinforced concrete foundation to build the next century on, and Bill Gates would still be the richest man in the USA.

    15% contribution was a great number, until wages stagnated.

    Best wishes,

    Steven Cecchini

  • Report this Comment On May 24, 2014, at 3:41 PM, asICit wrote:

    I take particular exception to the following claim made in this article... "For example, waiting as long as possible to take your Social Security disbursements will increase the amount you're eventually paid out. According to, a person who begins taking Social Security distributions at age 70 will receive 76% more than an individual who begins taking their disbursement when they're first eligible at age 62. If you can comfortably live off your retirement accounts until age 70, then this could be a smart move." First, everything else being equal, if two individuals start collecting their Social Security benefits, one at 62 and the other eight years later at 70, it is true that the 70 year old will receive the higher monthly benefit. However, it will take the 70 year old at least eight years to catch up to the benefits already paid out to the 62 year old by the time they both reach age 78. Secondly, the lower monthly benefit received by the 62 year old (eight years before the 70 year old) could potentially be invested at a higher yield to earn a greater income return, than would be realized by waiting until age 70 to collect the higher monthly Social Security benefit. Third, due to the effects of inflation, benefits paid out in today's dollars will have more purchasing power than benefits paid out in future dollars, eight years from now. Finally, although the monthly benefit will be higher for the 70 year old Social Security recipient, he/she will receive that higher benefit for 96 (8 X 12) fewer months than the 62 year old and they would both have to live to an age well beyond 85, for the older recipient's benefits to surpass the benefits of the younger recipient by anywhere near 76% as stated in this article. Remember, "a bird in the hand is worth two in the bush", meaning that unless you have a surviving spouse or other qualifying dependent, neither you nor your heirs will receive a single dime in benefits from Social Security, if you die before you reach age 70. Choose carefully, it's later than you think!

  • Report this Comment On May 24, 2014, at 4:50 PM, wwalrus wrote:

    It is so easy to talk about 75%or less being quite all right for the peons to exist on, so I guess it was and still is just fine for the cheap tinhorn politicians to keep stealing SS (by keeping it where it is easy to misappropriate. ) Many of the shmucks close to retirement-including myself-are counting on that money-even if we do have other resources.It is the idea that all of the money in the trough is just there for them to "redistribute" as they( the CTP)see fit, and WE will be damned glad to get what they give us.

    Send a message-REELECT NO INCUMBENTS,all new cannot be any less effective.Experience for these.only equates to more efficient theft.


  • Report this Comment On May 24, 2014, at 5:25 PM, Governmentstinks wrote:

    Hey Sean, you should work for the federal government since your story is the same type they feed us - BS. The SS trust fund isn't going to be broke, IT'S BROKE RIGHT NOW! All it has is I.O.U.s from the feds, it has no real money in it. The feds have always taken the extra SS income, money not being paid out, and spent it. THERE IS NO MONEY IN THE SS TRUST FUND - PEPEAT - NONE! It is part of our government's massive unfunded liabilities that is now about 100 TRILLION dollars and adding about $9,000,000,000,000.00 dollars a year. Last year SS paid out about 80 billion more than it took in. Where did the rest come from? The federal deficit. Is that a definition of broke? Get year head out of your butt and try writing something truthful.

  • Report this Comment On May 24, 2014, at 5:42 PM, rrhutchchapp wrote:

    rav55.. I don't understand your comment? "how about if ALL Americans PAID EQUALLY regardless of income into the fund." We all pay the same percentage? I don't think you are suggesting that someone who makes $20K/year should pay the same AMOUNT as someone making $100K/year? Do you mean that we should eliminate the cap on income subject to social security tax? Others on these comments have.

    Here is a bit of history. When Franklin Roosevelt designed this, he wanted to avoid any stigma that this was a welfare or income redistribution program. He wanted to have some relationship between what you paid in and what you take out. This is in fact what we have today (it isn't perfect.. higher income tax payers get a lower "return" on their contributions than lower income people do.. but it is reasonably close.).

    If you remove the cap subject to the tax and don't then allow people to collect against that (and I for one do not believe we would ever allow millionaires to take out 6 figures a year in social security payments), then all you have done is created one more income transfer program (or welfare as it is more commonly known). Is that we want this to become?

  • Report this Comment On May 24, 2014, at 5:51 PM, Stelios22 wrote:

    *Just* 25% off the paycheck? Tell that to a senior living on the edge. 25% can be the difference between surviving and not. We no longer have the social support structure of bygone days, where kids would just take care of elderly parents.

  • Report this Comment On May 24, 2014, at 6:23 PM, qualityman89 wrote:

    Problem people have with Social Security is it was passed to be a supplement to your retirement plan, not the retirement plan. Of course back when passed 75 to 80% of companies had retirement plans and now less than 25% have them. Cut so companies could get more profit for share holders. So best thing to do is start a 401K or IRA and religiously set aside money for retirement. Be careful of 401ks though it is based on the Stock Market and last financial crisis people lost 35 to 60% of their investment and some companies who contributed money to their accounts stop, again to insure higher profits for stock holders.

  • Report this Comment On May 24, 2014, at 7:46 PM, doublecheck wrote:

    An answer to "rw93003," "Governmentstinks" and others. I respectfully disagree with just about everything you say.

    Total liabilities of the USA (deficit and debt -- you do know the difference between the two, don't you?) total $54 trillion. Where do you get the $100 trillion figure? For the last twenty years Social Security has paid out less than it took in. It's why President Obama could afford to lower the Social Security tax for employees by 2% for 2010 and 2011. Comparing Social Security to a Ponzi scheme is such an old, tired and inaccurate talking point, it hardly needs a comment. It's like calling Ponzi a philanthropist.

    Anyway, the National Debt is not a factor when it comes to Social Security and Social Security does not contribute to the deficit.

    Talking about "investing" (another word for PRIVATIZATION): Since its inception the Social Security Trust Fund has not lost a penny and administrative expenses have never exceeded 2.3 percent. Since 1989 expenses have been one percent or less. If Bush had managed to "privatize" Social Security, the banks would have charged an average 12.5 percent in administrative costs and everybody's social security would have been wiped out during the Wall Street meltdown, leaving us with nothing.

    Let's "privatize" Social Security. So the same bankers who caused the Great Depression, the Recession of 2008 and every stock market crash since 1907, will be in charge of your pension funds. For an enormous "administration fee" they will speculate with your money until it's all gone. And while bankers are siphoning off your money, the GOP will raise the retirement age so you'll be dead before you're eligible for benefits.

    "Everybody knows the minimum age for Social Security should be raised, because we live longer," is said too often. But who is "everybody?" A Social Security Administration study found that in the last 30 years the life expectancy of male workers in the top half of income, retiring at 65 had risen six years. But the bottom half of the income distribution only lived 1.3 years longer. Draw your own conclusions.

    But if you're really interested in the true facts about Social Security visit this website: and be sure to read both Part 1 and Part 2.

    Anyway, I really thought I had found a group of smart and savvy people, but the title of this site ("Motley Fool") may be more descriptive than one would suspect.

  • Report this Comment On May 24, 2014, at 8:18 PM, bigfoot1958 wrote:

    Reagan raided the social security trust fund. It is low on funds because the U.S. government owes SS billions.

  • Report this Comment On May 24, 2014, at 8:21 PM, bigfoot1958 wrote:

    SOCIAL SEC was a no touch trust fund that Reagan raided. The National debt is 25% owed to Social Security dumbies.

  • Report this Comment On May 24, 2014, at 10:12 PM, gayle wrote:

    There are few people who would be able to live with a 25% reduction in SS benefits. They need to raise the ceiling on amount taxed for SS up to like 200K a year or have no cap at all.

  • Report this Comment On May 24, 2014, at 11:16 PM, BidEdSr46 wrote:

    Actually, what should happen is All income, rather than just from wages be treated the same for SSA tax purposes. If a person has only dividend income, then NO SSA taxes are paid, no matter how many millions of dollars are paid. Granted then, most seniors have some dividend income, so adjustments can be made for the age of the person collecting the dividends. This alone would probably cause many brokers and company owners to move overseas........

  • Report this Comment On May 25, 2014, at 2:22 AM, doublecheck wrote:

    This is primarily for bigfoot1958 and anyone else who thinks "the shoe fits." This is my last entry on this subject. Even one (motley) fool can come up with more misinformation than another motley fool can refute, or address.

    Neither Reagan, nor any other President, or Congress "raided" the Social Security and/or the Medicare Trust fund. It is illegal and impossible. Why do you think Reagan raised the debt limit 17 times, if he could have just taken the money from the Trust Fund? Use your brains.

    Anyway, as I said earlier: I really thought I had found a group of smart and savvy people, but the title of this site ("Motley Fool") may be more descriptive than one would suspect.

  • Report this Comment On May 25, 2014, at 5:15 AM, greyhound44 wrote:

    Yet another IDIOT retirement POS article!!

    Sure glad I retired on 31 Aug 2003 at age 58.75 after having paid MAXIMUM (SS portion) of FICA for 35+ years which allowed me to take MAXIMUM SS retirement benefits (reduced for age) at 62.

    Have paid NO FICA since; only $199. in property taxes in the US since 2004, and NO income taxes since 2007.

    Starve the government Beast!!!!!!!

    retired expatriate (11 years in Conde Nast's 2013 "World's Best City".

  • Report this Comment On May 25, 2014, at 5:22 AM, greyhound44 wrote:

    The Congressional Research Service ( a pretty reliable and reasonable - for government- group) concluded +/- 2 years ago that if the Social Security "CAPS"/taxable wage base were eliminated that the SS "Trust Fund" (JOKE) would be solvent for 70 years.

    Will not happen as ALL politicians and their contributors would be affected.

    retired expatriate MD

  • Report this Comment On May 25, 2014, at 2:51 PM, JohnThomas wrote:

    The simple, easy solution the Fool offers?

    >>>"dropping benefits just 25%"

    Wow. How easy! The majority of us recipients whose biggest portion of retirement income will be social Social Security are SO relieved.

    Now we just have to turn off the electricity for half the year and eat cat food every other month - and we'll be just fine.

    That's a much simpler fix than just raising the contribution cap. That would be so difficult for those earning more than $300,000 a year to pay an equal percentage as the poor and middle class.


  • Report this Comment On May 25, 2014, at 7:02 PM, 2549 wrote:

    Thank you for publishing this.

    That the notion of SS going broke is so pervasive is a great tribute to right-wing propaganda, which has been telling them that for years.

    But there is a better way to deal with the problem of running short of cash in 2030, simply raise the maximum salary limits charged SS tax from, I believe, $110k/year to whatever it needs to be, or make all income taxable and forget the problem forever.

  • Report this Comment On May 25, 2014, at 11:07 PM, franksalot wrote:

    By the year 2050, there will be very few baby boomers still alive and any problems with the social security fund will cease to exist.

    It seems to me that whenever an article is written about social security and its ability to pay benefits in the future, the writer refers to baby boomers as if they are going to be around forever wreaking havoc on the SS fund. To me, the immortal baby boomer seems to be the big myth.

  • Report this Comment On May 25, 2014, at 11:20 PM, Zebra365 wrote:

    Sean, the myth is not that the trust fund will run out of money, the myth is that the trust fund has any money at all right now. Politicians cling to this myth and cite it as an excuse for not fixing the fiscal problem just yet.

    I'm not even going to explain how this convoluted accounting system causes the "National Debt" to go DOWN when Social Security pays out more than it takes in as it has since 2010. (Read that over again and understand it, then try to disprove it) At your age you should be curious enough to look into it yourself.

    I'm just going to give you a short lesson in real accounting, not the stuff that the government uses to come up with "The National Debt"..

    In order for something to be an asset it must have intrinsic value i.e., real property or be someone else's liability. If I write you a check, then you have an asset and I have a liability. If I write myself a check, then I have both the asset and the liability, it's a wash, no matter how big the check.

    The Social Security and Medicare trust funds are composed of checks written by the US Treasury, one part of the Federal Government, to the trust funds, another part of the Federal government.

    They are not listed as "debt held by the public" and they are not marketable bonds. It's a wash. Just look at this Treasury report on page iv, that's exactly what it says to explain why the trust funds don't show up in chart 4 as an asset.

    "The Government also reports about $4.8 trillion of intragovernmental debt outstanding, which arises when one part of the Government borrows from another. For example, Government funds (e.g., Social Security and Medicare trust funds) are typically required to invest excess annual receipts in federal debt securities issued by the Treasury Department, thus creating liabilities of the Treasury and assets of the trust funds. These respective amounts are included in Department of the Treasury and investing agency financial statements, but offset each other in the preparation of the Governmentwide consolidated financial statements, and thus, are not reflected in Chart 4."

    So, either you are right and the Treasury is lying or I am right and the Treasury is telling the truth. Either way, no matter what you want to believe, it means that ALL future payments from either trust fund will come from future taxation or borrowing and not from some phony balance of the so-called "trust funds".

  • Report this Comment On May 27, 2014, at 11:34 PM, Teako3 wrote:


    As you can see, the SS Trust Fund through 2013 had net increases in its assets. Your 2010 date is false.

    In Millions

    Year Receipts Expenses Net Diff Assets

    2010 781,128 712,526 68,602 2,608,950

    2011 805,057 736,083 68,975 2,677,925

    2012 840,190 785,781 54,409 2,732,334

    2013 855,021 822,925 32,096 2,764,431

  • Report this Comment On May 27, 2014, at 11:38 PM, Teako3 wrote:

    The amount of total ignorance on this board about the subject of Social Security is breath taking. Lots of Fools here. doublecheck has it right.

  • Report this Comment On October 13, 2014, at 6:47 PM, martinamarty3219 wrote:

    congress/president takes money out of the excess trust funds that are us an IOU which is worthless. They take money out to use on whatever they see fit to do, which is my money for me not for them to play with. Do they give it back? No they continue to take and now are talking of dropping the amount to give to me making them short me money that I put in the fund and was invested. (trust funds). I have no say over what they use the money for when they take it money.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2963964, ~/Articles/ArticleHandler.aspx, 8/28/2015 11:33:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

Today's Market

updated Moments ago Sponsored by:
DOW 16,627.64 -27.13 -0.16%
S&P 500 1,988.77 1.11 0.06%
NASD 4,822.76 10.05 0.21%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes