Last year about 63 million Americans received approximately one trillion dollars in Social Security benefits. According to some sources Social Security is expected to run out of money by the year 2034. There is a lot of misinformation out about the Social Security program, and it should be helpful to set the record straight.
Myth #1- Social Security is going broke because the politicians in Washington have used the money for other purposes.
This is widely believed but not true. The reasons that Social Security is running out of money are as follows:
- In 1945 there were forty-two workers for every one person receiving Social Security benefits. In 2018, the ratio is 3:1. In fact starting this year Social Security will be paying out more than it receives in revenue and will use reserves to fulfill its obligations.
- People are living longer, and as such some will receive more in Social Security benefits than what they contribute. In 1940 the life expectancy of a 65-year-old was almost fourteen years. Today it is just over twenty years.
Myth #2- Once its reserves are depleted Social Security benefits will cease.
This is not correct, it just means that the system will only be able to pay out in benefits what it receives in revenue. The latest report from the Trustees of Social Security states when reserves are used up that it will result in a benefit cut of about twenty percent to all recipients.
Myth #3- Everyone should begin collecting Social Security at age 62 because the system is going broke.
This is also incorrect. Everyone’s financial situation is different, and few know how long they are going to live when they reach that age. Again, Social Security will continue to pay out benefits as long as there is a workforce continuing to pay into the system. This is another reason why job creation is so important.
In conclusion no matter how close someone is to retirement, they can expect to receive Social Security benefits in the future. However if no reforms are made to the current system those benefits may not be as generous as once was hoped.