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Social Security is a sensitive topic for people of all ages, but especially for the 65 million Americans who today claim its benefits after paying taxes into the fund throughout their careers. There are a lot of myths around the Social Security program that need to be debunked. Here are some of the biggest that seniors should not fall for or feel anxious about.
- Immigrants are Illegally Taking Social Security: This myth comes from a confusion between Social Security benefits and Supplemental Security Income. Social Security benefitscan only be drawn by someone with a Social Security number who has paid into Social Security through their job’s payroll for around 10 years or more. If an immigrant hasn’t done this after becoming a citizen, they won’t be getting social security. Supplemental Security Income (SSI)is a welfare program that can be collected by any person who demonstrates the extreme financial need necessary to qualify. Immigrants who haven’t yet obtained citizenship can collect from this program as long as they demonstrate they are in the country legally and have the basic need for it. Many think this is the same as Social Security, but it’s a totally different program paid from a totally different fund, though the Social Security Administration still oversees it.
- Social Security is Running Out: The situation now isn’t that Social Security is running out, it’s just that the program is back to breaking even after years of excess profitability. When there were more people working than there were drawing benefits, there were extra taxes paid into Social Security that didn’t need to be spent right away. That extra money was put into a trust fund that is being invested to grow itself. With the growing rate of baby boomers entering retirement, the funds being collected for Social Security isn’t the same rate as it was before, which means that the margin between the incoming and outgoing funds is smaller than it was.
- The Federal Government Steals from Social Security: Many people misinterpret the government’s stewardship of Social Security as stealing from the trust fund. When you put your money in any bank savings account or invest it in any stocks, the money doesn’t just sit there. The bank or company uses it to try to make even more money through stocks and equities. The Federal government does the same thing with the trust fund—invests it in things like public infrastructure and the militarybecause they hope those investments will earn your money back for you and more. Is this return guaranteed? That’s a different question.
- We Should Privatize Social Security: It’s been estimated that the cost to privatize Social Security would be something like $5 trillion in the first twenty years. Currently the program operates with extremely low overhead and achieves an extremely important goal—ensuring the elderly and disabled don’t live in poverty. The point of Social Security is that those who work and contribute to society for a significant period are guaranteed some sort of support as they age. Privatizing Social Security and putting everyone in charge of their own accounts based on personal earnings would not only be a huge, expensive process but could also undo the social good intended by the program to begin with.
- Waiting to Take Social Security Means You Won’t Get Any: In the past few decades, it was often the strategy with the most return for seniors to begin drawing on Social Security as soon as they were able, at age 62. Even though their overall benefits were reduced by 25-30% by drawing on funds early, these seniors got early support from the program when they needed it. However, as lifespans get longer, delaying taking benefits until between ages 67-70can make a big difference in the returns over a longer lifespan into the 80s and beyond. If you can wait until age 70, you’ll draw 8% more per year for the years between your full retirement age and 70. Even with the current challenges facing the program, it’s still worth it to trust and wait to draw benefits. Seniors should still sign up for Social Security as soon as they are able, but wait to begin taking benefits out.
These myths can be used to make seniors fear for their future. Having enough money to cover costs in retirement is a challenge that causes anxiety to millions of Americans. Never forget there are always assets you can sell, like a house that’s too big, an extra car, or a life insurance policy that is no longer wanted and needed, to help you build a nest egg and delay taking Social Security benefits to allow the returns to grow. If you’re interested in life settlements, visit our calculatorto see if you qualify.