Social Security: Fact vs. fiction

Mar 26, 2012, 6 a.m.

Death and taxes are inevitable, but not all folks feel the same way about Social Security benefits. An astounding 65 percent of those surveyed said they had little or no confidence in the future of Social Security, according to an AARP poll. The lack of faith may be unwarranted. AARP provided a number of facts and cleared up the fiction with regards to information on Social Security, noting the outlook is not as bleak as many believe.

Fiction: Social Security is going down the tubes so fast I won't get any benefits when I retire.

Fact: The first part of the equation about Society Security evaporating quickly used to have a grain of truth, but AARP notes the situation is improving rather than getting worse. New proposals hit the deck in 2010 that aim to correct the dwindling funds and supply enough funds to pay out benefits going forward.

Examples of the proposals include changes in benefits due to the increased life expectancy of Americans and increasing the limit on the percentage of wages subject to payroll taxes. An additional dose of fictional Social Security information comes from the idea that benefits will run out altogether. Even if changes were not being put in place, benefits would more likely be reduced rather than eliminated altogether. But neither should be an issue for the long haul or the immediate future if the feds pay attention to the system and smooth out its problematic wrinkles.

Fiction: The government is pulling a joke on us by investing the Social Security trust funds in bonds. The government does, in fact, invest Social Security trust funds in bonds. That much is true. The trust funds are monies collected above and beyond what is currently needed to pay out Social Security benefits. Instead of letting the money sit around and do nothing, the government invests the money in Treasury bonds where it can earn interest.

Rather than being a joke, AARP says this is a legitimate business transaction. It also notes the Social Security trust funds are treated in the same way other Treasury bond investments are. They earn interest and they will eventually be paid back.

As it stands, Social Security has enough funds to keep paying the full range of benefits through the year 2037, AARP explains. Even if no changes were made concerning additional incoming funds, Social Security would remain strong enough to pay out an estimated 75 percent of the benefits after 2037.

Fiction: Social Security will never give me as much as I am guaranteed to make from my own investments. Investing your own money in a retirement fund is a good idea, AARP says, but it is also a gamble. Stock market crashes and living longer than you budgeted for can still leave you in the lurch without any retirement income whatsoever.

Social Security is not designed to make you rich or to provide the best bang for your investment bucks. It is instead devised to ensure you have regular incoming cash that sticks around as long as you do, whether it serves as a supplement or the mainstay of your incoming cash.

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