Simplifying Social Security misinformation.

I copied this quote from the blog cited. Do you see anything that is misleading … and may perpetuate the wrong ideas about Social Security?

The monthly payout depends upon a) how much the citizen input through taxes across their career, and b) when they initiate payments (between ages 62-70). Once started, payments end the longer of when they or their spouse dies (only one active plan per person).

WELL, the monthly payout does not depend on the taxes paid. That myth perpetuates the idea that “I paid for my Social Security benefits, I earned them.” You didn’t‼️ You paid taxes, just like any other taxes you paid, that’s as far as it goes.

Then look at this point of view from another advocacy group. They don’t know the difference between a pension which is a defined benefit plan, a defined contribution plan (401k) and a retirement plan which is a generic term which used used to include both DB and DC. AND, they don’t seem to know that the retirement savings withdrawal strategy retirees use (such as the 4% rule), does indeed index for inflation.

Roughly 70 percent of people age 65 or older have some sort of pension other than Social Security, which means, of course, that 30 percent of households have no private pension at all. Most benefits are not large. The median value of all defined-contribution pension accumulations for people over age 65 in 2013 was $118,000, enough to pay an annuity of $581 per month to a 65-year-old woman. But such benefits are not indexed for inflation.

Then, of course, they ignore non-employer based investments and savings or assets. Employer “pensions” are far from the only way to save.


  1. If you worked less than 35 years at a SS job, and therefore paid less taxes than if you had worked 35 years or more, your SS pension payments are reduced, as I understand it. Therefore, SS pension payments do depend on SS tax paid in.


    1. Lower earnings mean lower taxes paid, but so does the time worked. Nope they don’t depend on taxes paid. If they did benefits should expire when they exceed taxes paid like mine did two years ago. A married person should not get higher family benefits than a single person paying the same taxes. A person single all their life and who marries six months before retirement should not get 50% more and neither should the person with an ex spouse and a current spouse all collected a benefit on only one person paying taxes. It’s just a tax like any other tax. The benefits are generated by the benefit formulas in the law. That’s why the fund is being depleted. Tax revenue is insufficient to provide promised benefits.


      1. If it is just a tax, like any other tax, then to equal things out, everyone should get the same exact amount each month. As I have read the history of the Social Security Law, it was to ensure that no retiree would live in poverty, not to be a windfall for the rich. As Melton Freidman put it. “Social Security is the biggest wealth transfer to the rich, that was ever devised.” Why should a high paid employee get a higher check, just because, he had a higher income. The higher income earner had more disposable income during his working years, he had more to save for retirement, and so he can get by on less from Social Security. But, I know that is not the way it works, and everyone gets back everything that was paid in FICA taxes in 6 to 10 years of collecting benefits. So, no none that reaches benefit age has anything to complain about. But, it is not the Social Security beneficiaries fault, that the government did not tax at a higher rate, to cover future benefits. The government has known that the Social Security Trust Fund has been under funded for over 30 years. The FICA tax has not been raised since 1990, yet we have corporations with record profits. I know Social Security is supposed to be self funded, but just like the benefits amounts that are paid out today, the law can be changed. I believe it will be changed in the 2030s, and no benefits will be cut. I would like to see the law changed and that employers would have to pay in the same amount on each worker, and each worker would get the same monthly benefit. I know that would never happen, because the Boss, does not want the worker to get the same as the Boss gets in Social Security benefits. .


      2. You seem to be trying to say that benefits are not determined by taxes paid, which is true. But that doesn’t mean there is no dependency.


      3. That’s exactly what I said. Not sure what you mean by dependency, but the trust is surely dependent on payroll taxes followed by interest earned on the treasury bonds plus the income taxes paid on 50% of the benefit. Taxes paid on the other taxable 15% goes to Medicare.


      4. rdquin wrote “That’s exactly what I said..” No, it isn’t. Exactly what you said is: “WELL, the monthly payout does not depend on the taxes paid.” But it does depend on the taxes paid, as I said. What you meant to say was that the monthly payout does not determine the taxes paid. “Depend” versus “determine” — they differ.


      5. Well, if you want to get picky, you are still incorrect. Monthly payments (payouts) depend on the assets in the trust which includes payroll taxes, income taxes on 50% of SS benefits, interest on bonds held in the trust and next year likely on redemption of bonds.


      6. No. Picky is my middle name. When I say payouts depend on taxes paid, that does not mean payouts don’t also depend on other things as well. Something may depend on several factors. Saying payouts depend on taxes paid does not imply they do not also depend on other factors. That’s the difference between “depend on” and “be determined by”.


    2. Your Social Security benefit is a very complex calculation. If I put it into words correctly, it involves taking a maximum of your highest 35 years of Social Security wages. and you must have worked having at least 40 qualifying quarters. The average wage then has a factor applied to make all the WAGES based on the year that you reached age 60. You then take that average and divide it 420 (which is 35 years x 12 months) it becomes your AIME (Average Indexed Monthly Earnings). You then do another 3-step calculation and you get your PIA (Primary Insurance Amount) which is the amount that you would get at FRA (Full Retirement Age). The PIA is then adjusted up or down to the actual age you start collecting Social Security and any COLA (Cost-Of-Living Adjustments) increases. After that your adjusted PIA becomes your Social Security check that is then direct deposited into your bank account. If you work less than 35 years, those years are add into the calculations as zero.

      No amount of taxes paid is considered or inputted into the calculation. True if you earn less, you payless taxes but it is wages that are calculated. See Social Security publication to read it for yourself. On page two you can insert your SSA wages from your W2 from the last 35 years and apply the index factor for each year that you worked. Then you can follow the remaining steps.

      Click to access EN-05-10070-1956.pdf

      This is the latest I can find on the internet. It is for people who turned age 62 in 2018. You can do all the math using your personal statement that SSA on page of this publication. Or you can just read your SSA pre-retirement statement SSA-7005. There are similar publications available explaining how your Medicare is figured.

      All other online calculators are based on this formula and should be close. Of course the final is based on the day you apply to collect and is based on your ACTUAL SSA pay records. I was able to verify all of my SSA wages going back to 1977 except for 1980 and 1985 which I lost in one of my moves. (I know, I am sick that I still have those records)

      In true government fashion, the average dollar number is rounded down in all cases and will affect the adjusted PIA amount too.


      1. Dwayne G. – When I was 50, I was offered a job for $50,000 per year, if I moved from Montana to Atlanta, GA. I did not take the job, but just to see what it would mean to my Social Security benefit, I used the calculator to see how much my SS check would increase. I put in the numbers to be added to the 27 years that I already had and adding the $500,000 in income over the next 10 years, and guess what the increase per month was, just $100. So, the 27 years of lower income, average of $12,000 per year, was not overcome much, by 10 years of $50,000 per year. I would just about get back the FICA taxes that I paid over the 10 years, in increased benefits. The $31,000 in FICA taxes, that my employer paid, would be a gain to the trust fund.


  2. “Ensure your earning are properly and accurately reported or you may lose out on your benefit money.”

    You really think that the government cares about what you end up getting in Social Security benefits. I read it as, we want to make sure you and your employer paid all the taxes owed on your earnings. LOL. Happy Holidays.


  3. The following is a direct cut & paste from my latest Social Security Statement – Form SSA-7005 – OL (01/20) which is sent to pre-retirees.

    Page 3, under section “Help Us Keep Your Earnings Record Accurate”, second paragraph.
    “Remember, it’s your earnings, not the amount of taxes you paid or the number of credits you’ve earned, that determine your benefit amount.”

    That sentence kind a of explains the whole purpose of that section. Ensure your earning are properly and accurately reported or you may lose out on your benefit money.

    People need to read the stuff that is sent to you directly by the government for the facts instead of relying on special interest groups or authors with agendas. (In the cited article, I think the author was generalizing and just over simplified the facts resulting in misstating how social security works.)


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