Social Security Is Unfair. Here Are 3 Reasons Why

Source: Wikimedia Commons.

Social Security is a key part of how millions of retirees make ends meet financially. But there are several things about the Social Security program that just aren't fair, and those shortcomings make many people critical of whether Social Security reform is necessary.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at three ways that Social Security is unfair. He notes that the amount of Social Security benefits you get isn't always directly proportional to the taxes you pay, with higher-income workers getting a smaller percentage of the taxes they pay back in benefits. Second, Social Security favors married couples, giving spousal and survivors' benefits that most single people don't take advantage of. Finally, for some people, Social Security benefits are subject to income tax, which many retirees see as double taxation on their career earnings. Social Security might not be fair, but it's still a lifeline for millions of retirees in America, and it's unlikely to go away.

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Read/Post Comments (21) | Recommend This Article (48)

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 July 19, 2014, at 10:58 AM, teddyshunnarah wrote:

    Social Security Reform is much needed, people

    don't always become Disabled do to sickness,

    Auto accident play a major roll in people becoming

    Disabled, this is a life changer to the worst, and when your case is settled, the lawyers get Half,

    not helping the victim, so reform her is much needed, ,Not only on Social Security , but also

    on how the lawyers get paid, cause the person hurt

    should get his full policy limits, with lawyers getting paid a deferent way, As of now SSD should

    double. 60% of ones wages is not cutting life,

    and the expenses .

  • Report this Comment On July 19, 2014, at 11:12 AM, tfcane wrote:

    You can thank the liberals for taxing SS

  • Report this Comment On July 19, 2014, at 12:36 PM, pachips wrote:

    Interesting when you compare the chart in the video to the next chart in the source document -

    Figure V.C2.—Maximum-Family-Benefit Formula for Those Newly Eligible in 2013

  • Report this Comment On July 19, 2014, at 1:15 PM, Grubnut wrote:

    tfcane, do you intentionally lie or are you just completely uninformed? Taxation of Social Security benefits was passed during the Reagan administration, proposed by Reagan's Greenspan Commission and signed into law by Reagan.

  • Report this Comment On July 19, 2014, at 2:31 PM, clchapman wrote:

    SS is very unfair

    My wife has worked for more than 40 years her last 10 have been at a very good pay scale

    She has retired and draws a measly 985.00 a month

    We know two people neither is past their 30's and have hardly worked and yet they draw 800 a month plus have Medicaid which pays all their medical bills

    Seems very unfair that the wife worked her backside off all these years and she gets medicare and has to pay for that yet these two get Medicaid and pay nothing

    Both of these people do anything they want to yet claim they are disabled and get SSD

  • Report this Comment On July 19, 2014, at 2:50 PM, kolobnative wrote:

    "You can thank the liberals for taxing SS"

    Scrape the Murdoch out of your ears. SS was taxed by Ronnie Reagan, the conservative darling who raised taxes three times while dramatically lowering the taxes of the ultra-wealthy. He also gave amnesty to immigrants to enlarge the cheap labor pool.

    He was no liberal by any means.

  • Report this Comment On July 19, 2014, at 3:11 PM, gadfly1000 wrote:

    Dan Caplinger is not just wrong about "unfair," he's downright indecent, imputing to Social Security something it is not and reflecting his "I want," "gimme" generation.

    1) Social Security is not a savings account. The returns are progressive, just as income taxes are, not proportional. It provides an income floor and helps insure people with low lifetime incomes don't have an impoverished old age. Therefore there are "breakpoints" in the pension calculation.

    If you die single the first month of retirement, you get back nothing, but you might as well say health and auto insurance don't give back proportionately because if you don't get sick or have an accident you don't get your premiums back.

    2) The same applies to spouse and dependent payments. We, the society, contribute so that the aged, the disabled and the families among us get needed economic support. That's not unfair. That's civilized.

    3) Until 1983 there was no income tax on the pensions resulting from contributions made by employers. Caplinger thinks this free ride was "fair"? The taxation then and in the 90s saved the system for another 75 years and we'll probably have to pony up modestly again to pay for the good news that we can live longer, healthier lives. Quit crabbing, or will you call that "unfair"as well?

  • Report this Comment On July 19, 2014, at 3:17 PM, gadfly1000 wrote:

    clchapman doesn't know what he's talking about.

    First, if his wife is drawing a "measly" $985, it's because her average lifetime earnings AFTER inflation correction(!) were a measly $19,000 or so per year. Or maybe, and he forgets to tell us this, she retired at 62 and the $985 is a 25% reduction.

    Second, people don't just say they're disabled and run out to collect a check. There is a fairly rigorous and sometimes long process to prove disability. If they are very young, they could not possible have contributed long enough to calculate a regular pension, so an adjustment in the amount is made. They also don't qualify for Medicare until after two years on disability. As for Medicaid, the qualifications in all states are pretty strict. It may be these people are not on Social Security at all, since chapman's knowledge is rather fragile. They might be getting SSI, which is completely different, or some combination.

  • Report this Comment On July 19, 2014, at 7:33 PM, srtek wrote:

    Taxing Social Security can be extremely unfair. For example, if a couple's joint income is greater than $42,000 in a given tax year, and benefits received in excess of $32,000 per year are taxed at 85%. In my case, I need to work to help our son with his educational expenses, so I continue to work. And, since my income alone is over $42,000, I have to give $850 back to the government for every $1,000 in benefits I receive over $32,000. Tell me, please, what other groups of taxpayers are taxed at 85% in our country?

    Also, I waited until age 70 to receive my Social Security. However, my wife's survival benefit is based on what I would've gotten had I started taking my Social Security at age 65.

    We are encouraged to wait until age 70 to take our benefit, but the government takes unfair advantage of the majority of the benefits we receive by waiting until age 70.

    Let's be fair about this, our benefits shouldn't be reduced because other haven't paid into the system. I paid substantially to receive the benefits I'm receiving. All I ask is that the amount I receive be based on what I've put into the system, and payouts to my spouse should be based on my benefit with I started receiving my Social Security income... not what it would've been years before that time.

    And another thought... the primary reason that Social Security is going to run out is that the government has supposedly borrowed funds from Social Security to fund other government programs. With our Country trillions in debt, what's happening is that when the funds are repaid, they only way this can happen is for them to print more money. And that act alone devalues (reduces the value of) our benefits. The payouts that were originally forecasted were based on actuarial tables and no consideration was made for our government invading the ongoing funds to support other programs. The very least that should be done, when paying back the debt they incurred, is to pay it back with interest at the actual rate incurred so the fund would retain its expected value, and this should be done with real money instead of borrowed/printed money.

    The insurance companies that have sold annuities to their customers aren't experiencing difficult in living up to their contracts, so this is yet another example of our government involving themselves in matters that should be managed by the private sector. Look at the Post Office and the awful job the government has done with it.

    Really, our government needs to govern and stop trying to compete with private enterprise.

    Shame on the Federal Government who are now also in the automotive industry.

  • Report this Comment On July 19, 2014, at 7:55 PM, calidude52 wrote:

    I don't understand why gadfly1000 and others feel that retirees and soon to be retirees want a free handout. They have paid into a system for 30-40 years and will not receive the proportionate benefits, particularly those at the top of the contribution level.

    I have contributed for the last thirty years, with the last ten years at the highest income level. Yet, my expected earnings at my earliest retirement age is around $20000 annually. Those who have earned much less in annual income receive less, but not much. And that is fine in one respect, so that seniors have some income stream. My concern comes in when I think about the income cap. If SS will pay me 20K annually and I want to still earn closer to my six figure income, the government will take away my SS if I have earned income over 14K -- really? So I can only make 34K annually if I want to keep my benefits.

    This needs to be fixed. Recipients should not have income caps. If they want to earn much more than 14K, and can find the work, why not let them? They will ultimately spend that money and help the economy.

  • Report this Comment On July 19, 2014, at 8:07 PM, JohanStrauss wrote:

    Higher income people don't *need* SS. And it would kinda hard for single folks to claim spousal benefits...if they HAD NO SOUSE, huh? And lastly, you only pay income tax on SS if you make over a certain amount (as listed on the SSA website).

    Let's give *all* the *correct* info, Fool, without a stupid video.

  • Report this Comment On July 19, 2014, at 9:05 PM, TomCleve wrote:

    srtek, you misunderstand the tax, or you are deliberately misinforming. Your benefits are not TAXED at 85%.but rather 85% of your benefits ( like mine) are taxed at whatever rate your bracket puts you, probably the 25% bracket, So of every $1000 of benefits you receive, the govt takes 25% of 850 or $212.50, NOT $850.

  • Report this Comment On July 19, 2014, at 9:23 PM, Freddyfreebe1 wrote:

    Reform sounds good but remember you had to fight the republicans to even have Social Security today. Just like Obamacare, it was a lot better before the republicans had a say so in it. Republicans support the Rich, the greedy and the selfish , if you are none of these things , don't let the Republicans get into any part of Social Security, Medicare, Medicaid or any other program that helps people.

  • Report this Comment On July 19, 2014, at 10:51 PM, les49er wrote:

    It is utterly shocking that people come on here and show how unaware and uneducated they are. And by the way, our government had the guts to fire Rick Waggoner and save the American auto industry.

  • Report this Comment On July 20, 2014, at 9:34 AM, Poworker wrote:

    Oh yeah, he forgot to mention one of the most unfair things about SS. Some people pay SS tax on all of their pay while some have a "cap" on their wages.

    I say remove the cap then it would be much fairer.

  • Report this Comment On July 20, 2014, at 9:38 AM, Poworker wrote:

    @ cicchapman - You should have mentioned in your rant exactly what kind of job your wife had for 40 years etc.....If she was a Federal civil servant there will be a cap on what she can receive. (probably)

  • Report this Comment On July 20, 2014, at 3:02 PM, EdHamox wrote:


    If there is anyone out there who doesn't know, this is an excellent


    Now don't be mad at old people, just remember who did this...

    Franklin Delano. Roosevelt

    32nd. President, Democrat

    Terms of Office March 4, 1933, to April 12, 1945

    Our Social Security A Democrat, introduced the Social Security

    (FICA) Program. He Promised:

    1.) That participation in the Program would be Completely voluntary,

    2.) That the participants would only have to pay 1% of the first

    $1,400 of their annual Incomes into the Program,

    3) That the money the participants elected to put Into the Program would

    be deductible from Their income for tax purposes each year,

    4.) That the money the participants put into the Independent 'Trust

    Fund' rather than into the General operating fund, and therefore, would Only

    be used to fund the Social Security Retirement Program, and no other

    Government program, and

    5.) That the annuity payments to the retirees would never be taxed as


    Since many of us have paid into FICA for years and are now receiving a

    Social Security check every month -- and then finding that we are getting

    taxed on 85% of the money we paid to the Federal government to 'Put Away' --

    you may be interested in the following:

    Dwight David Eisenhower

    34th. President, Republican,

    Term Of Office: January 20, 1953 to January 20, 1961

    Insert by Vincent Peter Render,

    If I recall correctly, 1958 is the first year that Congress, not President

    Eisenhower, voted to remove funds from Social Security and put it into the

    General Fund for Congress to spend.

    If I recall correctly, it was a democratically controlled Congress.

    From what I understand, Congress logic at that time was that there was so

    much money in Social Security Fund that it would never run out / be used up

    for the purpose it was intended / set aside for.

    Lyndon Baines Johnson 36th.President, Democrat

    Term Of Office: November 22, 1963 to January 20, 1969

    Which Political Party took Social Security from the Independent

    'Trust Fund' and put it into the General Fund so that Congress could spend


    It was Lyndon B. Johnson

    and the democratically Controlled House and


    Which Political Party eliminated the income tax Deduction for

    Social Security

    (FICA) withholding?

    The Democratic Party.

    William Jefferson Clinton

    (Bill Clinton)

    42nd. President

    Democrat Term of Office: January 20, 1993 to January 20, 2001

    Albert Arnold Gore, Jr.

    45th. Vice President

    Democrat Term of Office: January 20, 1993 to January 20, 2001

    Which Political Party started taxing Social Security


    The Democratic Party, with Albert Arnold Gore, Jr. (Al Gore)

    casting the 'tie-breaking' deciding vote as President of the Senate, while

    he was Vice President of the US ...

    ------------------THE STRAW THAT BROKE THE CAMEL'S BACK!!-----------

    James Earl Carter, Jr

    39th President, Democrat

    Term of Office: January 20, 1977 to January 20, 1981

    Which Political Party decided to start giving Annuity payments

    to immigrants?






    Then, after violating the original contract (FICA), the Democrats turn

    around and tell you that the Republicans want to take your Social Security


    And the worst part about it, is uninformed citizens believe it!

    If enough people read this, maybe a seed of Awareness will be planted and maybe changes WILL evolve!

    Maybe not, some Democrats are awfully sure of what isn't so. But it's worth a try.

    "A government big enough to give you everything you want,

    is strong enough to take everything you have".

    Thomas Jefferson

  • Report this Comment On July 20, 2014, at 6:00 PM, mediaprohi wrote:

    Does anyone else get tired of hearing how loudly the six figure annual income folk whine about "unfairness"?

    The little-known secret of the deal that allowed SS to even exist involved getting the doctor and hospital lobby on board. Back in the bad ole' days, poor folk (a lot of them; this was the Depression) were considered charity cases and "payment" was often delivered as eggs and chickens. Amazingly, that was when doctors still made house calls.

    So, SS was really a welfare program for the rich in a period like the present when businesses weren't hiring and disposable income was disposed of years before.

    It also was never meant to supplement the retiree's income. It was primarily meant to make sure that those in poverty and with little means did not have to live their final years in even more abject poverty.

    What's really, really, really unfair is the whiners who have had every opportunity in life and have been rewarded for that effort now whining about how SS is unfair to them.

    And this is after spending most of their productive years never contributing a dime to SS of their six figure income above the cap!

    I know what's coming, but, but, but payments are capped after a certain amount of income as well. So what? As a previous poster pointed out, you might pay into health and auto insurance and never receive anything back because you are healthy and still alive. Congratulations!

    Now stop your whining. And that includes the author of this article!

  • Report this Comment On July 21, 2014, at 10:15 AM, gskinner75006 wrote:

    When people start to understand that SS is a supplement and not a retirement plan, things will get better.

  • Report this Comment On July 22, 2014, at 3:43 PM, devoish wrote:

    We have Social Security, because without it we would just have the investment industry and our employers.

    Best wishes,


  • Report this Comment On July 22, 2014, at 11:16 PM, DanFPilot wrote:

    I pity those that think that SS is a good deal. Especially those that rely on SS.

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Dan Caplinger

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 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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