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Top 5 Social Security Myths

Old 08-30-10, 10:42 AM
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Top 5 Social Security Myths

http://pol.moveon.org/ssmyths/index.html?rc=homepage



Rumors of Social Security's demise are greatly exaggerated. But some powerful people keep spreading lies about the program to scare people into accepting benefit cuts. Can you check out this list of Social Security myths and share it with your friends, family and coworkers?





Myth: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a 'T'). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever.1 After 2037, it'll still be able to pay out 75% of scheduled benefits--and again, that's without any changes. The program started preparing for the Baby Boomers retirement decades ago.2 Anyone who insists Social Security is broke probably wants to break it themselves.


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Myth: We have to raise the retirement age because people are living longer.

Reality: This is a red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What's more, what gains there have been are distributed very unevenly--since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.


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Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.


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Myth: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market--which would have been disastrous--but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.


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Myth: Social Security adds to the deficit

Reality: It's not just wrong -- it's impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can't add one penny to the deficit.1


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Sources:

1."To Deficit Hawks: We the People Know Best on Social Security" New Deal 2.0, June 14, 2010
http://www.newdeal20.org/2010/06/14/...ecurity-12290/

2. "The Straight Facts on Social Security" Economic Opportunity Institute, September 2009
http://www.eoionline.org/retirement_...rity-Sep09.pdf

3. "Social Security and the Age of Retirement"Center for Economic and Policy Research, June 2010
http://www.cepr.net/index.php/public...of-retirement/

4. "More on raising the retirement age" Ezra Klein, Washington Post, July 8, 2010
http://voices.washingtonpost.com/ezr...etirement.html

5. "Social Security is sustainable" Economic and Policy Institute, May 27, 2010
http://www.epi.org/analysis_and_opin...s_sustainable/

6. "Maximum wage contribution and the amount for a credit in 2010." Social Security Administration, April 23, 2010
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240

7. "Trust Fund FAQs" Social Security Administration, February 18, 2010
http://www.ssa.gov/OACT/ProgData/fundFAQ.html

8. "To Deficit Hawks: We the People Know Best on Social Security" New Deal 2.0, June 14, 2010
http://www.newdeal20.org/2010/06/14/...ecurity-12290/

I have a small disagreement with a couple of the 5 - but basically they are factual.
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Old 08-30-10, 10:47 AM
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Re: Top 5 Social Security Myths

After 2037, it'll still be able to pay out 75% of scheduled benefits
Since I won't retire by then, that doesn't sound good to me. How is that not a reason to worry?

Not even close to true. The Social Security Trust Fund isn't full of IOUs, it's full of U.S. Treasury Bonds.
How are Bonds not IOUs?
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Old 08-30-10, 10:48 AM
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Re: Top 5 Social Security Myths

Originally Posted by classicman2 View Post
Can you check out this list of Social Security myths and share it with your friends, family and coworkers?
Which of these categories do you consider us?
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Old 08-30-10, 10:49 AM
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Re: Top 5 Social Security Myths

From: Thor Simpson
To: 5 of my friends
Bcc: Michael Steele

Subject: FW: Top 5 Social Security Myths
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Old 08-30-10, 10:53 AM
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Re: Top 5 Social Security Myths

I'm waiting for Snopes to pick this up before I comment.
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Old 08-30-10, 11:25 AM
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Re: Top 5 Social Security Myths

Originally Posted by Venusian View Post
How are Bonds not IOUs?
A certificate of debt issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified future date.
Sounds like an IOU to me.
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Old 08-30-10, 11:32 AM
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Re: Top 5 Social Security Myths

full faith & credit - quote: The federal government has never missed a single interest payment.

Myth no. 5 is not, in reality, factual. The Unified Budget makes the SS trust fund part of the budget.
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Old 08-30-10, 11:35 AM
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Re: Top 5 Social Security Myths

So its an IOU from someone who hasn't missed a payment. That doesn't mean it isn't an IOU.
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Old 08-30-10, 11:38 AM
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Re: Top 5 Social Security Myths

O.K. If you insist - it's an IOU. Are you happy now?
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Old 08-30-10, 11:51 AM
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Re: Top 5 Social Security Myths

Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed. But if we want to strengthen it, here's a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.
Aren't "the rich" also limited to the size of check they get from Social Security, which is based on the amount they put in? How is that not "their fair share" in this myth?

I thought this was social insurance and not just another liberal wealth distribution scheme.
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Old 08-30-10, 11:55 AM
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Re: Top 5 Social Security Myths

Originally Posted by kvrdave View Post
Aren't "the rich" also limited to the size of check they get from Social Security, which is based on the amount they put in? How is that not "their fair share" in this myth?

I thought this was social insurance and not just another liberal wealth distribution scheme.
Obviously if the earnings cap is removed, an adjustment in benefits paid wil have to be made.

How is that 'just another liberal wealth distribution scheme?'
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Old 08-30-10, 11:56 AM
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Re: Top 5 Social Security Myths

the rich are limited in the amount the receive but are also limited in the amount taxable towards social security. It used to be after $82k or so nothing more was taken out for SS, its higher now. its much better for them that way as they would hopefully invest the money in something that is interest yielding and with less restrictions. SS is not going anywhere especially since the average SS benefit is about $600 per person per month.

edit: the only thing I can see social security needing to do much better is to recover more overpayments or higher amounts. there are people with tens of thousands of dollars in o/p being recovered in very small montly payments if at all.
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Old 08-30-10, 12:01 PM
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Re: Top 5 Social Security Myths

Social Security needs, to remain healthy, needs to do a lot more than just recovering overpayments.
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Old 08-30-10, 12:37 PM
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Re: Top 5 Social Security Myths

Originally Posted by classicman2 View Post
Obviously if the earnings cap is removed, an adjustment in benefits paid wil have to be made.

How is that 'just another liberal wealth distribution scheme?'
That's not what people are proposing when they talk about lifting the cap. The saying "pay their fair share" is garbage to anyone who understands what the word "fair" actually means.
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Old 08-30-10, 12:42 PM
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Re: Top 5 Social Security Myths

Originally Posted by classicman2 View Post
Obviously if the earnings cap is removed, an adjustment in benefits paid wil have to be made.

How is that 'just another liberal wealth distribution scheme?'
I didn't see anything about an adjustment in benefits made, and I'll bet it wasn't what the author intended either.

By charging "your fair share" but not actually paying out an amount that corresponds to it.

If you were correct that there would be an adjustment in the payout, I'd revise my opinion possibly. But I don't think that is what they mean at all.
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Old 08-30-10, 12:55 PM
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Re: Top 5 Social Security Myths

Originally Posted by Venusian View Post
So its an IOU from someone who hasn't missed a payment. That doesn't mean it isn't an IOU.
In the broader sense, US bonds stopped being an IOU, if they ever truly were, once gold was abandoned. This is especially true in today's world.
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Old 08-30-10, 12:59 PM
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Re: Top 5 Social Security Myths

Has anyone done the math on the amount you put in versus the amount you get back. I've heard that the return is not that great and you could do better by putting that money into a retirement account.

EDIT: So my money is invested in bonds? What a great ROI (return on investment). My wife have a few bonds and on average their rates barely keeps up with inflation.

After 2037, it'll still be able to pay out 75% of scheduled benefits
Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn't need to be fixed.
I think this is another contridiction along with bonds not being IOUs

Last edited by Jane2001; 08-30-10 at 01:10 PM.
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Old 08-30-10, 01:07 PM
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Re: Top 5 Social Security Myths

Originally Posted by Pharoh View Post
In the broader sense, US bonds stopped being an IOU, if they ever truly were, once gold was abandoned. This is especially true in today's world.
please explain
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Old 08-30-10, 01:16 PM
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Re: Top 5 Social Security Myths

Originally Posted by Jane2001 View Post
Has anyone done the math on the amount you put in versus the amount you get back. I've heard that the return is not that great and you could do better by putting that money into a retirement account.

EDIT: So my money is invested in bonds? What a great ROI (return on investment). My wife have a few bonds and on average their rates barely keeps up with inflation.
To be fair, buying and holding bonds would have done better than the market the last 10 years.
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Old 08-30-10, 01:17 PM
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Re: Top 5 Social Security Myths

Originally Posted by Pharoh View Post
In the broader sense, US bonds stopped being an IOU, if they ever truly were, once gold was abandoned. This is especially true in today's world.
As far as I understand it the Government gets X amount in cash and gives SS a bond that promises to pay X amount and interest at a future date.

To simplify
Goverment: "Give me money and I'll owe ya plus interest."
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Old 08-30-10, 01:27 PM
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Re: Top 5 Social Security Myths

Social security doesn't need to be fixed, but will only pay out 75% by 2037? We don't need to raise retirement age even though that same section points out that people ARE living longer, especially in the higher brackets? Say the rich start pausing their fair share Now, and by that I assume will also get their fair share of benefits... Won't that allow a lot of rich people who retire now to take out more than they put in, and how will we ever catch up? Or by fair share do they mean paying on all of their income for no extra benefit? Can the US government pay out all those bonds on time?
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Old 08-30-10, 01:35 PM
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Re: Top 5 Social Security Myths

2037? That's the year I will retire if I stay with the state. Crap.
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Old 08-30-10, 01:38 PM
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Re: Top 5 Social Security Myths

Originally Posted by Venusian View Post
please explain
Bonds are issues after the monies have been created/spent. They are more of a book keeping tool.
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Old 08-30-10, 01:49 PM
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Re: Top 5 Social Security Myths

Originally Posted by Jane2001 View Post
Has anyone done the math on the amount you put in versus the amount you get back. I've heard that the return is not that great and you could do better by putting that money into a retirement account.

EDIT: So my money is invested in bonds? What a great ROI (return on investment). My wife have a few bonds and on average their rates barely keeps up with inflation.

I think this is another contridiction along with bonds not being IOUs
It is mostly a Ponzi scheme. Current taxes primarily pay current benefits. At the moment, the tax is slightly more than required, and the difference goes to Treasury bonds. A pretty solid IOU, but an IOU.

If you work a normal time, live a normal life, you get back somewhat more than you put in; using actuarial data and time value of money, it is a small positive return on "investment" if you just look at pay in -- get back (remember, it is a gov. Ponzi scheme, most of the proceeds are not invested).

Over the long haul, you would probably do better if you didn't have to pay, and could put the same money in a retirement account. Obviously there is a risk to that, and we have seen the result of that risk in an extremely volatile stock market for the past few years. We may be in an extended period where my claim of doing better is wrong.

The money to pay that "return" depends on increasing tax rates, a larger pool of labor, etc (illegals who pay in and get nothing back give the government a huge conflict of interest on immigration policy, hence Arizona. States pay, Feds reap the benefits.)
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Old 08-30-10, 01:51 PM
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Re: Top 5 Social Security Myths

Originally Posted by Pharoh View Post
Bonds are issues after the monies have been created/spent. They are more of a book keeping tool.
How and when the government spends the money is irrelevant to the fact that money is owed when the bond matures. Bonds are obviously IOUs.
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