Social Security Myths vs. Facts

SSA says the familiar "people used to die before 65" argument relies on life expectancy at birth, which is misleading because early-20th-century infant and child mortality dragged those numbers down. The more relevant measure is remaining life expectancy at age 65; on that basis, the increase since 1940 has been "a modest 5 years (on average)." [4]

The 1983 amendments already raised the age for unreduced retirement benefits gradually to 67, which applies to everyone born in 1960 or later. Age 62 is still available, with a larger reduction: 30% for someone whose full retirement age is 67. [5] [6]

CBO is blunt about the tradeoff: raising the full retirement age reduces scheduled lifetime benefits for every affected recipient, regardless of claim age. A 2019 CBO analysis found that if the full retirement age reached 70, the reduction for claiming at 62 would rise to 45 percent. [7] [8]

The 15.3% is the self-employment rate, and IRS says it combines 12.4% for Social Security with 2.9% for Medicare. Medicare has no wage base limit. So the "just invest 15.3% yourself" line is already bundling two different programs into one talking point. [9] [10]

SSA also says Social Security was never meant to be the only source of retirement income; it replaces a percentage of a worker's pre-retirement income, based on lifetime earnings. More importantly, it provides disability, survivor and family protection, which are risks an IRA does not cover. [11] [12] [1]

Private saving matters; it just does different work than a government-run social insurance floor that pays monthly benefits under a statutory formula.

Under current law, only earnings up to the taxable maximum are subject to Social Security tax and count toward retirement benefits. SSA's actuaries model both kinds of proposals: one that eliminates the taxable maximum with no benefit credit above the current-law cap, and another that does provide benefit credit. [13]

CBO also models a version that taxes earnings above $250,000 while continuing to use the current-law taxable maximum to calculate benefits, and CBO says scheduled benefits would not change under that alternative. [14]

The benefit formula is already progressive: 90% of the first slice of average indexed monthly earnings, 32% of the next slice, and 15% above that. Higher taxed earnings do not automatically translate into equal-value added benefits. [15]

SSA says payroll tax income is deposited daily and invested in special-issue Treasury securities. The cash exchanged for those securities goes into the Treasury's general fund and becomes indistinguishable from other Treasury cash. That part is real. [2]

SSA also says the trust fund has never been "put into the general fund" in the sense people usually mean. The securities the trust funds hold are not "worthless IOUs": they are backed by the full faith and credit of the U.S. government, and SSA says the government has always repaid Social Security, with interest. [16] [2]

The accurate version: Treasury used the cash, and the trust funds received legally binding securities plus interest in return.

Life expectancy at birth in the 1930s was pushed down by high infant and child mortality, which makes it a poor yardstick for whether workers who paid payroll taxes would reach retirement. By SSA's own measure, most Americans could expect to live to age 65 once they survived childhood. [17]

Men who reached 65 in 1940 could expect almost 13 more years of life and women nearly 15. There were already 7.8 million Americans age 65 or older in 1935, and the original planners projected 8.3 million by 1940, when monthly benefits began. [4]

The program was not secretly engineered as a sucker bet. The real issue has always been financing and demographics, not a hidden trick in the original design.