Updated Tuesday, September 23, 2014 as of 10:31 AM ET

Social Security: Common Myths & Hard Facts

Social Security benefits represent the largest asset for many mass-affluent clients, according to a Society of Actuary study titled “The Impact of Running Out of Money In Retirement.” One way that financial planners can help clients manage this important asset is to make sure they understand how the system works and not get swayed by political posturing, media hype or popular myth.

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Comments (7)
My opinion - Thank you Paul for your comments and I agree we need to ignore the hype. But your research still shows the true problem. In 2030, The Trust Fund will be exhausted and Social Security Tax revenues will only cover 72% of the required benefit payments. Unless benefits are reduced or taxes increased, the Federal government will need to make up the shortfall annually. This expected payment will be huge and a major expense of the Federal Government. Either overall income taxes will need to be raised or overall spending reduced to create a more balanced budget. Further, between now and then as the Trust Fund is being tapped, it is the Federal government that needs to pay back the principal. My understanding is that this money will also need to be borrowed to finance it. This further exacerbates the Federal debt problem. I agree with you, the problem is not Social Security, the problem is that we already have a significant debt and deficit problem. If we had been running surpluses and were the number one creditor nation in the world, we could manager this better. But we are not. Thus, the pressure this put on our national debt and needed income tax revenues is staggering. We do have time to solve most of this issue through minor changes, but this is a change in the social contract under which the SS taxes were collected.
Posted by Bill S | Thursday, December 05 2013 at 3:56PM ET
I disagree with the statement "Social Security does not contribute to the federal debt" as it will if nothing changes. As mentioned, the fund has $2.5t in treasuries that will be depleted by 2030. As Bill mentioned, those funds will need to be borrowed in order to make principal payments. So indirectly, the SS fund will add 2.5 trillion in Federal debt by mid 2030 unless rev/expenses change by then. Not a huge number relative to the projected debt by then but still worth noting.
Posted by tim c | Thursday, December 05 2013 at 4:16PM ET
I am very aware of all of all of the rulings; 2 Supreme decisions, the 1983 changes, etc. So here is the question no one seems to be able to answer, "since Social security is a tax on income, why do we pay taxes on all of the benefits we receive at ages 65-67?

Gary A.
Posted by Gary A | Thursday, December 05 2013 at 5:21PM ET
All of our "posturing" and words will do no good at all until those words are "hailed upon" our idiot congressional reps and Senators. So, stop beating up each other and start beating down the doors of those you and I have elected. Don't like the taxes on paid SS benefits, get the Dem's to change the law they passed. Don't want to lose your current level of benefit, get more people to contribute which means more people at work and less people on the "dole". Want "more" money paid into the system, why not take off the top end on earnings cap? We continuously "beat up" on our Congressman, and two senators. Once a month, we send letters, e-mails, and make phone calls. Sooner, or later, we hope to get these folks to understand our concerns as Financial Advisors, and what this means to our clientele...
Posted by L. D. R | Friday, December 06 2013 at 4:31PM ET
The SS Trust Fund is merely an accounting entity. When the gov't monetizes these funds buy purchasing treasuries, it is in effect entering the Ponzi phase as described by Hyman Minsky. Misuse of these funds to offset unrelated discretionary spending will lead to a crisis larger than the one we are still muddling through.
Posted by Anthony F | Saturday, December 07 2013 at 6:25PM ET
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