Whether you realize it or not, Social Security is unquestionably our nation's most important social program. Each month, 62% of aged beneficiaries lean on their monthly check to provide at least half of their monthly income, with about a third relying on their payout for virtually all of their income (90%-plus). Without Social Security, elderly poverty rates would probably be through the roof.

Yet, for as critical a role as Social Security winds up playing for seniors during retirement, the American public knows very little about the program. In mid-May, MassMutual Financial released the results of a five-question, true-false online Social Security quiz that stuck to basic concepts. Even though the survey focused on adults aged 50 and over (i.e., those who'd be the likeliest to understand Social Security, seeing as how they're nearing retirement age), a whopping 47% failed to correctly answer four or more questions, and thus earn a passing grade.

A man in a suit holding a stack of hundred dollar bills behind his back while also crossing his fingers.

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Tackling Social Security's most pervasive misconception

Americans' lack of Social Security knowledge is a big reason why so many misconceptions about the program exist. But if there's one myth that appears to supersede them all, it's the belief that Congress has stolen or raided Social Security's asset reserves and absconded with the money. Below are the three things you really need to know about Congress borrowing money from Social Security.

1. It's a loan (by law) and not theft or a raid

Social Security's asset reserve is nothing more than the sum of the program's net cash inflow since inception. Since 1983, when the Reagan administration last overhauled Social Security, and through 2017, the program has generated more income each year than it's expended via benefits, administrative costs, and its Railroad Retirement exchange contribution. Thus, a nearly $2.9 trillion surplus has been built up, which is commonly referred to as the program's "asset reserves."

However, Social Security doesn't just sit on $2.9 trillion in cash that's locked in a vault. That'd be silly, because inflation -- i.e., the rising price of goods and services -- would eat away at the value of a static pile of cash, no matter how large or small it is. Instead, law requires that the Social Security Administration (SSA) purchase special-issue bonds and, to a lesser extent, certificates of indebtedness with this cash. These bonds and certificates of indebtedness have various maturity dates and yields, depending on when they were purchased.

In return for holding these bonds, the Social Security program is paid interest annually by the federal government. As for the government, it gets easy access to money that it can borrow for all sorts of general revenue items. Sure, that could mean funding the defense department and wars, just as much as it could be to fund education or job-creating infrastructure projects.

Ultimately, Congress borrowing from Social Security is no different than a standard loan. It's not stealing, and it's certainly not a raid.

A fanned pile of hundred dollar bills lying atop fanned Treasury notes.

Image source: Getty Images.

2. A change in assets doesn't mean a change in value

Another aspect about the borrowing process that some folks get wrong is the belief that if lawmakers were to "pay the money they stole back, everything would be fine with Social Security."

Aside from disproving that Congress "stole" anything in the previous point, some people are obviously misconstruing what's happening when the SSA invests in special-issue bonds and certificates of indebtedness. If the SSA takes surplus cash and purchases other assets (bonds) with that cash, it's merely changed the nature of the asset without changing its value.

For instance, if you have $1,000 and you purchase a CD at your local bank, your bank hasn't stolen or raided your account. That $1,000 is still yours -- it's just not in your checking account anymore or under your mattress. Instead, it's in the form of a CD that'll yield interest over time, as well as repay your initial investment when matured. Assets come in numerous forms, and every cent of surplus that the Social Security program has generated is accounted for by its investment portfolio of bonds and certificates of indebtedness.

Long story short, if Congress were to "repay everything," the program would have the exact same amount in asset reserves ($2.89 trillion) as it has today. It wouldn't put the program on any better footing than it is now. In fact, as you'll see in the next point, it'd actually make things worse.

A Social Security card wedged between cash bills.

Image source: Getty Images.

3. It's a vital source of income for Social Security

Lastly, you might be overlooking just how important the interest income is that's earned from the bonds and certificates of indebtedness that the SSA purchases.

In 2017, the interest income from Social Security's asset reserves generated $85.1 billion of the $996.6 billion collected by the program. Over the next decade, more than $800 billion in income will be derived solely from the interest earned on Social Security's asset reserves. If Congress simply stopped borrowing from the program, this money would disappear.

Why's that a problem, you ask? According to the latest Social Security Board of Trustees report, the program is expected to begin expending more than it collects in 2018, and in each subsequent year. By 2034, its $2.89 trillion in asset reserves is expected to be completely depleted, which could ultimately lead to an across-the-board reduction in benefits of up to 21%. If Congress were no longer allowed to borrow from Social Security, this expected depletion date would almost certainly move forward.

In the end, you don't have to agree with or like the practice of Congress borrowing from Social Security, but you do need to understand its importance from a factual perspective.