We have reached the point in this policy debate where the sound of the sound bite is more important than the facts underneath it. Every candidate is entitled to his own opinion, but today candidates can simply make up facts to fit their sound bite. He is just wrong. The problems of Social Security have nothing to do with what is in the Trust Fund, and everything to do with the sums that were never collected by the system.
Social Security is financed, and today we are not even collecting enough to cover the financing burden of the system. His statement reflects conspiracy theories that are classified by the Social Administration as urban legend.
This once-upon-a-time sound bite ends reasoned discussion, and pulls us into Crazytown, USA. The problem for America is of course that Crazytown has a lot of voters. Consider that the following quote has drawn 50, likes and nearly , shares. We will never resolve the challenges of Social Security with politicians continually trolling Crazytown for votes.
Crazy or mostly false, the myth is pervasive. The federal government does, however, borrow from Social Security. Here's how: Social Security's tax revenue is, by law, invested in special U. Treasury securities. As with all Treasury bonds, the federal government can spend the proceeds on a variety of programs. But as with all bondholders, Treasury has to pay the money back, with interest.
Social Security redeems the securities to pay benefits. This borrowing fuels the notion that the government is raiding or even stealing from Social Security and leaving it with nothing but IOUs. The facts: Some have blamed problems with Social Security's financial health on undocumented immigrants draining the system's resources.
It's a popular complaint, but a false one. Noncitizens who live and work in the U. There is evidence that undocumented workers actually improve Social Security's bottom line. Some do obtain Social Security numbers under false pretenses, and payroll taxes are withheld from their wages even though they are not eligible to later collect benefits. The facts: The government does not stow your payroll tax contributions in a personal account for you, to be paid out with interest when you retire.
Your benefit is based on how much money you earned over your working life, not on how much you paid into the system. As noted above, those contributions fund benefits for current retirees and their survivors, and people with disabilities. When you retire, those still working will cover your benefits, and so on.
You might think of it less like saving for retirement — there are other vehicles for that — and more like an earned benefit the government promises to pay so you have at least some income in your later years. On average, it provides about 40 percent of a beneficiary's preretirement earnings. The formula for calculating benefits is weighted so that they replace a larger percentage of income for lower-wage workers and a lower percentage for upper-income earners.
The facts: This was true until The Social Security overhaul passed by Congress and signed by President Ronald Reagan the year before included a provision that made a portion of Social Security benefits taxable, depending on your income level. Above those thresholds, up to 85 percent of benefits are taxable.
Below them, you don't owe the IRS anything on your benefits. Roughly speaking, Social Security counts as income the money you get from work, pensions and investments; nontaxable interest; and half of your Social Security benefits. Their rules on taxing benefits vary widely; contact your state tax agency to learn more. The facts: If you are divorced, your former spouse may be eligible to collect Social Security benefits on your earnings record and vice versa.
Key Takeaways Social Security benefits are funded by a dedicated payroll tax, which workers pay into as they earn income. Social Security is a pay-as-you-go system, with contributions paid in today funding the benefits being paid out. As baby boomers retire, the ranks of those receiving benefits will swell, while those paying taxes will become a smaller percentage of the population. Due to demographic change, there is a risk that the system will run short of money because less will be paid in than is paid out.
Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.
You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Related Articles. Social Security Introduction to Social Security. Partner Links. Related Terms Social Security Definition Social Security is a federally run insurance program that provides benefits to many American retirees, their survivors, and workers who become disabled.
What Are Social Security Benefits? Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. Feb 15, at AM. You'll often find him writing about Obamacare, marijuana, drug and device development, Social Security, taxes, retirement issues and general macroeconomic topics of interest. Follow AMCScam. Image source: Getty Images. Join Stock Advisor Discounted offers are only available to new members.
Stock Advisor launched in February of
0コメント