Why don’t people want the truth about Social Security?

This article first appeared on HumbleDollar.com Check out the comments that site received

Myths That Won’t Die

Richard Quinn  |  Feb 16, 2023

I RECENTLY DISCUSSED Social Security with a friend. After trying to explain the program’s funding, I gave up when his reply was, “The facts are that the Social Security money was misappropriated and there’s no way it can be tracked after all these years. People die before they collect one Social Security check, and others get very few checks. You will never convince me otherwise.”

Yes, that’s the one thing we do agree on: I will indeed never change his mind.

It’s hard to counter all the misinformation I hear. Still, I keep trying. Here are seven persistent myths about Social Security that I encounter, and my response to each:

1. If the Social Security trust fund had been invested in the stock market, all would be well. When I use the Committee for a Responsible Federal Budget’s reformer tool, investing the trust in publicly traded stocks and bonds only closes about 6% of the funding gap, so the trust remains insolvent.

2. It’s my money—I paid for my benefits. Actually, you didn’t. In 2023, my wife and I will collect $56,940 in benefits based on my earnings record, and it’ll be our 15th year of collecting benefits. From 1959 until I retired, my employers and I together paid $266,000 in payroll taxes, far less than the benefits that my wife and I have since received. Did I pay for all the benefits we have and will collect? No.

3. I would be better off if I could have invested the taxes I paid. Perhaps some HumbleDollar readers could make that work—provided there were no disabilities, deaths, divorces or lack of discipline along the way. But one glance at the saving, investing and spending patterns of the typical American says this is a red herring. 

4. The payroll taxes I’ve paid determine the ultimate benefit received.Not true. Benefits are entirely based on earnings and the Social Security benefit formula. Many Americans—spouses, survivors, children, disabled individuals, ex-spouses—collect benefits having never paid a penny in payroll taxes. Keep in mind that two households with workers who paid the same payroll taxes can receive very different benefits if one is married.

5. Social Security is a ripoff because some people pay in and never collect. According to the Social Security Administration, that happens to only about 5% of taxpayers. Just like a pension or annuity, Social Security will always have actuarial gains that offset the losses—the latter being the benefits paid to individuals who live longer than expected. Social Security’s longevity calculator says I have 9.2 years to go. I’m striving to be a significant actuarial loss.

6. My Social Security benefits should never be taxed. Why not? If you had an employer-funded pension, the benefit would be taxed. If you purchased an income annuity, payments in excess of your after-tax contributions would be taxed. As noted earlier, beneficiaries have not paid in full for their benefits. In fact, the taxation of benefits is capped at 85% because, in aggregate, beneficiaries only pay for about 15% of the benefits they collect. Those taxes paid on Social Security benefits help pay for both Social Security and Medicare. 

7. The government misappropriated the Social Security trust fund. I often hear folks claim that this or that president stole Social Security’s money. Not true. The trust fund is dwindling for more mundane reasons. The working population relative to retirees has declined, life expectancy at age 65 has increased and benefits have risen over the years. All this means that payments are outpacing the trust fund’s revenues. Despite repeated warnings by Social Security’s trustees, Congress has failed to address the issue.

If the 6.2% payroll tax was increased to 7.7% on employer and worker alike, and pretax premiums under employers’ cafeteria plans were subject to payroll taxes, the program would be solvent for at least 75 years. Regular, modest future funding changes would keep the whole program solvent.

And guess what? Workers wouldn’t even notice the changes. Don’t believe me? Ask employees how much they pay in health insurance premiums.


  1. From the interesting comments on HD:
    “SSA was never intended to be the only basis for funding one’s retirement.”

    I’ve heard this many times. Says who? Most of my family relies entirely on SS for income. Some, not all, have the advantage of a mortgage free home.

    We don’t discuss finances a lot (Dad’s rules) but I get the impression they don’t consider themselves poor. Just normal.


    1. If you look at the history of SS and FDRs comments in the 1930s, you will see that was the intent. Except in true cases of poverty I see no reason for anyone to get to 65 and have to live on SS – although my parents did too..


      1. Looking at FDR comments. I’ve just brushed the surface so far, but this jumped out .*

        “This law, too, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.”
        FDR, August 14, 1935

        “…flatten out the peaks and valleys…” Is a feature you seldom, if ever hear. Something to consider when you propose “sunsetting” Social Security/Medicare, or “pulling them out by the roots.”

        * It’s logical. I’ve used the same argument for for government worker pensions. One out of seven US workers (or more) works for some level of government. Because of partial career workers, I believe an even higher percentage receive government pensions (and retiree healthcare, very important.)

        Flatten out the peaks and valleys.


  2. 7. Is the one I hear most, lately. “They ‘borrowed’ it and never paid it back!”

    Best answer I can give is, they (we) DID borrow it, in the form of Treasury notes. And they (we) ARE paying it back.*

    “And guess what? Workers wouldn’t even notice the changes.”… I agree.

    Also, they (we) invested it. No wonder it’s hard to understand. Semantics.


  3. The points made are valid but the idea of raising the tax to 7.7% and increasing tax base by adding income from cafeteria plans would be a non starter in my book. That equals 15.4% of wages and then comes a recommendation that people put 10-15% in retirement plans. There is no room for that kind of cost on the bottom half of workers and employers. Add on the green energy costs coming down the road and most of us will be will be applying for government aid instead of paying an onerous tax burden.


  4. Raise taxes and no one will notice? I would! You are starting to sound like the tax & spend folks in Congress. We need to also cap the max benefit at the top of the second SS formula bend point and move out FRA to 70 over the next 20+ years to eliminate 8%/yr delayed credits. Else you just delayed the trust fund dwindling issue, not eliminated it.


  5. I agree with “My Social Security benefits should never be taxed” because it never made sense to me why you would tax a benefit and then give out COLAs. Why take the income money away only to give it back? I am sure that the math doesn’t work out to be that simple, but it is the appearance of taking money and then giving it back.

    Also if you are going to tax the benefit, tax 100%, not 50% or 85% depending on income. Since it being taxed as income, if your income is too low, you will not have to pay any income tax. But in reality, it is income so it should be taxed as income.


    1. You really can’t tax the portion of SS that was effectively paid for with after tax money, hence less than 100% Keep in mind about 56% of seniors pay income tax on benefits.


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