myths & Facts
Listed are the most common myths and misconceptions about Social Security.
The President sets the COLA.
President Nixon signed legislation in 1972 which requires that Social Security benefits be automatically adjusted for inflation. The calculation is based on the CPI (Consumer Price Index) and CPI-W (Clerical Workers), a formula that gauges how the prices of things we need change over time.
In 1984, the president and members of congress, and federal employees became part of the Social Security system and had since paid into it.
Members of Congress don’t pay into the system.
Social Security is going broke.
Social Security has funding challenges but is not bankrupt. Benefits are paid through payroll taxes collected from current workers and their employers, and the program is currently operating with a surplus of about 2.8 trillion. With the rising number of retirees (baby boomers) and a drop in the birth rate, that may change. Raising the full retirement age from 65 to 67 and tax benefits based on income levels has helped to keep benefits afloat, at least for now.
If you claim Social Security retirement benefits early while still working, some of those benefits may be withheld, depending on your income. Social Security deducts $1 of benefits for every $2 earned above $21,240 (2023). The withheld benefits are not lost forever. When you reach full retirement age, Social Security will recalculate your monthly benefit, bumping it up to give you credit for benefits withheld.
Retirees lose benefits forever if they work.
Social Security payroll taxes go into the general fund.
Since the 1930s, the Social Security trust fund has never been part of the general fund. The Internal Revenue Service daily collects payroll taxes paid by workers and their employers, the revenue is immediately invested in interest-bearing US Treasury securities, as required by law, and credited to the Social Security fund.
Undocumented immigrants are not allowed to claim Social Security benefits. Yet, these workers and their employers pay payroll taxes. In 2010, Social Security netted $12 billion from undocumented workers and their employers.
*Supplemental Security Income (SSI) pays benefits to those with limited means and who are disabled, blind, or 65 and older. SSI is funded by the government’s general fund, not payroll taxes. Noncitizens eligible for SSI include refugees, asylum seekers, and those “lawfully admitted for permanent residence.”
Undocumented immigrants collect Social Security.
SSI beneficiaries who work will lose SSI and Medicaid.
Not necessarily. Depending on the income and potential work incentives, SSI beneficiaries could continue to receive SSI and Medicaid. Continued Medicaid Eligibility (also known as 1619b) allows SSI beneficiaries to keep Medicaid when their high earnings from employment cause SSI benefits to be suspended.
If I work part-time, I don’t have to report to Social Security that I am working.
Social Security requires reporting regardless of how much you work and how much you earn. It is always better to report than if you don’t- to avoid potential underpayments or overpayments.
There is no limit to how much you can earn from employment during the Trial Work period. Trial Work Thresholds ($1050/month for 2023 simply means that if earnings from employment are more than the threshold in a month, that month will be counted as a Trial Work month. There are 9 Trial Work months in the Trial Work Period.
During the Trial Work Period, I cannot make more than $1,050/month (2023), or I will lose SSDI.