You may have heard that Social Security is broke, bankrupt, insolvent, or some other variation. This is simply untrue. In fact, Social Security has trillions of dollars in reserves and is expected to run a surplus this year. Here's the truth about Social Security's finances and what to expect for the future.

A full transcript follows the video.

This video was recorded on Nov. 27, 2017.

Michael Douglass: Let's head on over to myth No. 5. This one is kind of a different myth from the others, because if people believe it, it might be in some ways better for them. We'll get to that in a minute. Myth No. 5: Social Security is going broke.

Matt Frankel: Yeah. This is one that, in all honesty, I asked Michael to include in the show because it bothers me a lot, just because of the sheer number of people, especially the younger generation, who believe it. The reality is, Social Security has nearly $3 trillion in reserves. That's enough that if we stopped charging Social Security tax and did nothing else, it could sustain the program for several years. Not only that, Social Security is actually running a surplus right now. Social Security brought in, I think, about $35 billion more than it paid out last year, and it's expected to do the same over the next five or six years. It's beyond that where the problem is. So there's some truth to this myth in that eventually, the number of retirees is going to grow, and it's going to be paying out a little bit more. But Social Security is not close to broke right now. The latest forecasts say, by 2044 is when it will run out of reserves. And keep in mind, there's still going to be payroll tax flowing into it. So, worst-case scenario, you'll see Social Security benefits have to be cut by a quarter. Social Security is not going completely broke or bankrupt, or whatever people want to say these days. It's just not true. That's almost $3 trillion and growing in Social Security's reserves.

Douglass: Yeah. What's interesting about this issue is, as you pointed out, even in the worst-case scenario, which is that no one -- not Congress, not anybody else -- no one figures out a way to fix the system or do things differently, and no one does anything at all, eventually the reserves will run dry. That is true. That's definitely going to happen at some point. But, even so, that would just necessitate a benefit cut. Of course, a benefit cut is a bad thing, to be clear. But it's not nearly as bad as Social Security going completely insolvent and not paying out at all. That's just really not on the table.

What's interesting about this is, at least for me, and Matt, I think this is probably true for you, too, I actually try to invest as if Social Security were going broke. Basically, my idea is to have enough money for retirement so that I'm not dependent on Social Security. I'm not thinking about Social Security. So whatever amount they're paying in benefits is gravy. It's icing on the cake. It's "insert other food metaphor." Instead, I can merely focus on living through my golden years and really enjoying them, and not be concerned about what might happen with a funding mechanism or a cost of living adjustment for Social Security, but really have enough in my savings that that's just not a concern.

Frankel: Right. This was what Michael was talking about, how this could actually be a good myth, in many ways, if you believe it. I'm 35. If I believe Social Security isn't going to be there when I retire, then I'm going, "Oh no, I'd better save a lot more for my retirement and build up a nice nest egg," which is honestly what people should be doing anyway. So in many ways, this is a very good myth, in terms of the effect that it could have.

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