Not every rumor out there regarding Social Security is true – the following myths are only common assumptions and are incorrect.
Myth 1: Social Security will be bankrupt soon.
Like any other program, Social Security could come up against financial backing challenges, but not right now and it wouldn’t be bankruptcy. The current workforce pays into the program through a payroll tax, and to date there is $2.8 trillion in excess.
However, the birth rate has declined and the number of retired individuals is increasing. While it’s been estimated that cash reserves might run out by 2034, there are still other methods of replenishing the system that haven’t been considered. Nevertheless, until the year 2090, Social Security expects to still pay 79 percent of the benefits that are promised. In the 1980s, the reserves were dwindling but Congress made adjustments to keep the program afloat.
Myth 2: When you pay taxes into Social Security, your money is placed into a protected account that is held for you. Upon retirement, you can get your funds back (plus interest).
Social security doesn’t quite work like this – instead, the system pays people that are retired now with the funds earned by working people today. When the people who are of working age now retire, their social security income will be paid for by the children of today, when they begin working.
Myth 3: The amount that you made during your life while you worked will determine how much your retirement benefits will be.
The social security system will assess your total earnings throughout your career and will focus on the 35 years where you earned the highest. Your earnings history will be computed and adjusted with a formula to find your Primary Insurance Amount (PIA), which is the amount of retirement benefits you’ll receive once you become retirement age.
The replacement formula is one tool that Social Security uses and is intended to balance the disbursement of benefits between low-, medium-, and high-income individuals. Recently, it’s been reported by the federal program that 57 percent of the low-income retiree’s earnings were replenished with Social Security, and higher-income individuals experienced a replenishment of approximately 35 percent.
Myth 4: Benefits can be compromised if retirees apply for SSDI and SSI.
Many people wonder, “Can you collect social security and disability at the same time?” and this is a legitimate and important question. In certain scenarios, individuals can be eligible to collect both Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) at once.
In order to obtain both types of benefits, the individual must have received approval for SSDI, yet the payments must be low. As there are many restrictions and guidelines for each program, there are instances where an individual might make too much or have too many assets to receive SSI, but they could still qualify for SSDI. The opposite can also be true. In rare situations, an individual can qualify for both SSDI and SSI benefits simultaneously.