The largest social welfare program in the US, Social Security accounts for 37% of government expenditure and 7% of GDP. Its disability benefits are paid to people who cannot work because of a medical condition that is expected to last at least a year, or result in death. Applicants have the right to representation by an attorney or other qualified person of their choice when they do business with Social Security. Disability attorneys, usually with the help of medical review services provided by medical record review companies, determine whether the applicant is eligible for benefits before filing the claim. This is important because the applicant’s condition must meet the very strict definition of disability laid down by federal law. Social Security does not pay money to people with short-term or partial disability.
The nagging concern Americans have now is regarding the possible solvency of Social Security. Let us examine some myths and facts surrounding US social security.
- Social Security is going bankrupt – This is a myth. The administration has enough money to pay retirement benefits for many decades even if urgent reforms are not made. The program may not however, have the means to meet all its planned obligations.
- The program will be available for present day young adults – This is a fact. This welfare program will continue unless Congress takes it apart, which is highly unlikely.
- Your Social Security assets are held in a personal investment account – This is false. A 2014 Pew survey found that at least 1/3rd of Americans believe that they have dedicated social security accounts. Social Security is not an investment fund, but rather a pay-as-you-go system that transfers money from workers to retired persons.
- Social security benefits may be taxable if one takes a large IRA withdrawal – True. However, if Social Security is one’s only source of income, the benefits may not be taxable. In the presence of other income, some of the benefits may be taxable. For instance, people who have saved using a traditional IRA could get hurt by mandatory withdrawals, which start after the investor reaches age 70 ½.
- One may lose benefits, if he/she is working while receiving Social Security – Not entirely true. If one is below full retirement age (for people presently employed, this is between age 66 or 67) some benefits may be reduced. The amount deducted depends on one’s age and earnings. If one remains below FRA throughout the year for 2016, the SSA will deduct one dollar in benefits for each $2 earned above $15,720. If one reaches FRA during 2016, the SSA will deduct one dollar for every three dollars earned above $41,880. But these benefits are only delayed, not lost. After one reaches full retirement age, the benefits will increase to make up for amounts withheld earlier. Once one reaches full retirement age, he/she can keep all the benefits, even if they are still working.