Social Security is often called the "third rail" of politics, because any politician who "touches it" (ie, threatens to reduce or eliminate it) is risking his career. But while politicians are usually unwilling to question Social Security, everyday citizens can and must! For it is precisely their life savings that are being directly impacted by Social Security and the laws governing it. Sadly, many people have highly inaccurate perceptions of what Social Security is and what legal rights we have to the money entrusted in it. So here are some clarifications:
Misconception #1 - We have a legal right to the money set aside for us in Social Security
Not true. According to a Social Security pamphlet issued in 1936 (which has never been challenged or updated):
"Beginning November 24, 1936, the United States government will set up a Social Security account for you. ... The checks will come to you as a right." First, there's no Social Security account containing your money, but more importantly, the U.S. Supreme Court has ruled on two occasions that Americans have no legal right to Social Security payments."
Economist Walter Williams elaborates on this fact, backing up his assertion with Supreme Court cases:
In Helvering v. Davis (1937), the court held that Social Security was not an insurance program, saying, "The proceeds of both (employee and employer) taxes are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way."
The bare, crass fact is that the money that goes into Social Security is treated as general purpose tax revenue and gets spent on virtually anything politicians can justify before Congress. The idea that any amount of money is set away for you - or that you are legally entitled to it, if it were - is simply not true.
Misconception #2 - Money is set aside for us in a separate "account" we can withdraw from upon retirement.
As noted above, this is just not true. Social Security is not like an annuity or other finanicial instrument that a for-profit bank would sell you. Rather, most of the money you pay in goes straight out the door to current retirees. Why? Because there was no account set aside for them, either. They receieve payments (as you will at that age if the system doesn't collapse) only because current workers are being taxed to support them. Indeed, this is a major reason people are doubting Social Security's long-term feasibility. Once the baby boomers retire en masse, there is a very real fear that there wont be enough current workers to tax in order to pay the boomers their promised benefits.
Misconception #2 - Social Security is required by law to earn a certain rate of return
This is not true either. In fact, most estimates from the government itself show that Social Security is earning a negative rate of return - that is, losing money. Sadly, contrary to what many believe, this is in no way illegal according to the actual written law. There is no requirement that Social Security earn a certain rate of return. So the next time a politician or state legislator tries to spin how important it is that we "save" Social Security, you might ask them "save it from what?"
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