We learned all about Social Security in elementary school. As a kid, it seemed like a pretty sweet deal: you work hard all your life, you contribute some of your check each week and, years later, Big Daddy Government gives everything back; it sounds like a safety net mixed with a gently forced retirement plan. Although we were taught this stuff, it seems that there is still some confusion regarding the whole concept.
For example, a few months ago, that Guy in the White House ran an ad accusing Joe Biden of “promising your benefits to illegal immigrants” (Politifact.com). Not only has Biden been trying to systematically dismantle Social Security, the ad claims, but he wants to give all of your hard-earned money to ineligible people who haven’t even paid their dues!
It would be a disturbing story – if it were remotely based in reality. In actuality, a vast amount of working illegal immigrants pay into the system without ever seeing a dime of Social Security upon retirement. It goes like this: “many immigrants who aren’t authorized to work in the US buy fake Social Security cards.” Then, the employer takes out tax payments and sends them along. When that number isn’t associated with an actual citizen, the federal government holds onto the taxes and, later, drops the cash into the Social Security trust funds; this money then ends up in the hands of retired Americans. (TheAtlantic.com). In 2010 alone, the payments from falsely documented workers “contributed roughly $12 billion” (TheAtlantic.com) to Social Security.
Another thing we get wrong is thinking that what we put into the system will find its way back to us, in full. The Social Security website promises that benefits are calculated based on your “lifetime earnings” (SSA.gov). That sounds just like what we were taught! Wait, though, what’s that next sentence? The SSA continues (as if that “lifetime earnings” thing never happened) by admitting that they only count the “35 years in which you earned the most” (SSA.gov). Some of us have been working on the books since the age of 16, and if we continue to work until 72, that means that there’s 21 years of payments that just go Poof – lost in the ether. Since more than “three out of five retirees” (Fool.com) depend on Social Security for about half of their income, that missing 21 years would come in handy for a lot of people.
Cavalierly ignoring years of work history freed up plenty of time for the Social Security Administration to write rules for uncommon situations. For example, if you’re responsible for your spouse being the opposite of alive, don’t expect those nice survivor death benefits to appear in your bank account (CNBC.com); you won’t even be eligible for the $255 lump-sum death benefit (CNBC.com)! Minor kids playing Norman Bates with Mom and Dad are likewise banned from receiving survivor benefits (CNBC.com). While this makes senses – bad behavior should never be rewarded – it’s frightening to think how many times the situation came up before guidance finally had to be written.
Social Security is a nice program with limitations. These limitations are to be expected, as the Social Security Administration itself warns that the payments were “never meant to be the only source of income” (SSA.gov) for retirees. Social Security helps, but it’s important to understand exactly what to expect upon leaving the workforce. We can’t depend on a partial program to meet all of our Golden Year needs – it’s up to us to make sound financial choices and save as much as we can for the rainy season.
Bourke Accounting bookkeepers and tax preparers understand the subtleties of Social Security. Not only can Bourke Accounting pros counsel you on the best time to retire, they can also discuss ways in which to make the transition painless. Talk to a Bourke Accounting expert for advice on what to do now in order to ensure the best retirement ever.
Written by Sue H.