3 Popular Social Security Myths — Debunked

There are several myths about Social Security, and most paint a gloom-and-doom picture about the program’s future. While it’s true that Social Security isn’t in the best financial condition right now, it isn’t exactly time to panic either.

With that in mind, here are three of the most common misconceptions about Social Security, as well as the reality of the situation.

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Myth 1: Social Security is broke

There are several variations of this myth, but they generally sound something like, “Congress took all of Social Security’s money and left trillions of dollars of IOUs. There is no money left.”

This is 100% false. Social Security had $2.85 trillion in reserves at the end of 2021, the last year for which we have finalized data. And while it’s true that Social Security’s reserves aren’t a giant bin full of cash, like any smart money manager, the trust fund administrators place it in interest-bearing instruments in order to generate income for the program.

Social Security’s reserves are held in U.S. Treasury securities, which can be converted to cash as needed. In fact, Social Security’s expenses in 2021 were $56 billion more than it brought in from tax and other revenue, and it was made up for through the reserves.

Myth 2: Social Security won’t be able to pay benefits to future retirees

As mentioned, Social Security operated at a deficit in 2021 and is expected to continue to do so in future years. So the bad news is that the Social Security trust funds are expected to be depleted in 2034.

However, even if the trust funds were allowed to run out of money and no legislation was passed to fix Social Security’s shortfalls (more on that later), Social Security still has money coming in through payroll taxes. In fact, even with no money in the trust fund, the money coming into Social Security would still be enough to pay 77% of scheduled benefits starting in 2035.

This would be a worst-case scenario. It’s highly probable that steps will be taken to fix Social Security at some point between now and then.

Myth 3: Massive benefit cuts are needed to fix Social Security

There’s no question that something needs to be done to fix Social Security. However, virtually nobody in Congress has seriously discussed across-the-board cuts to benefits. Certain types of targeted benefit cuts have been mentioned, such as only cutting benefits for high-income retirees, but even these proposals are likely to be phased in and aren’t likely to affect those who are already retired. There’s also talk of raising the full retirement age from 67 to 68, or even 70, but again, this would likely be phased in over time.

Additionally, cutting benefits is only one way to fix Social Security’s problems. We could also raise Social Security’s revenue in a few different ways. One popular idea is to increase the maximum amount of income subject to Social Security tax, and another is to leave the taxable maximum where it is, but to also make any income above $400,000 subject to Social Security tax.

Social Security isn’t in the best shape — but it’s not time to panic

The general theme is that while Social Security isn’t exactly on the best financial footing right now, despite what you may have read on social media or in news headlines, it isn’t on the brink of collapse either. The program is in need of reforms for long-term financial viability, but current retirees shouldn’t be afraid of benefit cuts, nor should future retirees assume they’re getting nothing.

After all, this isn’t the first time Social Security changes have been needed. In fact, the last increase in the full retirement age from 65 to 67 is still being phased in today.

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