This article is part of the Retirement Financial Life Equation (RFLE) series.
Every so often, a viral post (or a variation on it) shows up on social media about Social Security. I recently saw one—not written by but shared by a friend—expressing frustration that the government was supposedly renaming Social Security checks as “Federal Benefit Payments.” I did a quick search and found another similar one.
The posts argue that they are not “benefit payments,” but rather money paid to us from the earned income we contributed to the program. Furthermore, if we had invested what we paid into Social Security, we’d all have over a million dollars. Instead, the government used our money in a giant Ponzi scheme, and now they want to call it a benefit, as if we didn’t “earn it.”
As I stated in my first “Social Security Mythology” article, some of these claims, along with others in the posts, are at least partially true. Still, there is also a lot of misleading information and outright untruths in them. So, I thought it was perhaps time for another “Social Security Mythology” article.
For reference, here are the two posts from Facebook:
Post One: The Social Security check is now (or soon will be) referred to as a “Federal Benefit Payment?” I’ll be part of the one percent to forward this. I am forwarding it because it touches a nerve in me, and I hope it will in you. Please keep passing it on until everyone in our country has read it. The government is now referring to our Social Security checks as a “Federal Benefit Payment.” This isn’t a benefit. It is our money paid out of our earned income! Not only did we all contribute to Social Security but our employers did too. It totaled 15% of our income before taxes. If you averaged $30K per year over your working life, that’s close to 375/month, including both you and your employers contributions) at a meager 1% interest rate compounded monthly, after 40 years of working you’d have more than $1.3+ million dollars saved! This is your personal investment. Upon retirement, if you took out only 3% per year, you’d receive $39,318 per year, or $3,277 per month. That’s almost three times more than today’s average Social Security benefit of $1,230 per month, according to the Social Security Administration. (Google it – it’s a fact). And your retirement fund would last more than 33 years (until you’re 98 if you retire at age 65)! I can only imagine how much better most average-income people could live in retirement if our government had just invested our money in low-risk interest-earning accounts. Instead, the folks in Washington pulled off a bigger “Ponzi scheme” than Bernie Madoff ever did. They took our money and used it elsewhere. They forgot (oh yes, they knew) that it was OUR money they were taking. They didn’t have a referendum to ask us if we wanted to lend the money to them. And they didn’t pay interest on the debt they assumed. And recently they’ve told us that the money won’t support us for very much longer. But is it our fault they misused our investments? And now, to add insult to injury, they’re calling it a “benefit”, as if we never worked to earn every penny of it. Just because they borrowed the money doesn’t mean that our investments were a charity! Let’s take a stand. We have earned our right to Social Security and Medicare. Demand that our legislators bring some sense into our government. Find a way to keep Social Security and Medicare going for the sake of that 92% of our population who need it. Then call it what it is: Our Earned Retirement Income. 99% of people won’t Cut and Paste this to their timelines. Will you? Please, for the sake of our country, Copy & Paste. It’s important.
Post Two: Have you noticed, your Social Security check is now referred to as a “federal benefit payment”? I’ll be part of the one percent, to forward this, our government gets away with way too much in all areas of our lives, while they live lavishly on their grossly overpaid incomes! KEEP passing THIS AROUND UNTIL EVERY ONE HAS READ IT…..SOMETHING TO THINK ABOUT THE ONLY THING WRONG WITH THIS CALCULATION IS THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY COLLECTED THEIR SOCIAL SECURITY!!!! WHERE DID THAT MONEY GO????????????? This was sent to me, I am forwarding it because it does touch a nerve in me. This is another example of what Rick Perry called “TREASON in high places”!!! Get angry and pass this on! Remember, not only did you contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that’s close to $220,500. If you calculate the future value of $4,500 per year (yours & your employer’s contribution) at a simple 5% (less than what the government pays on the money that it borrows), after 49 years of working you’d have $892,919.98. If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had. Entitlement my butt, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!! Congressional benefits — free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that’s welfare, and they have the nerve to call my social security retirement entitlements? We’re “broke” and can’t help our own Seniors, Veterans, Orphans, Homeless. In the last months we have provided aid to Haiti, Chile, and Turkey . And now Pakistan ……home of bin Laden. Literally, BILLIONS of DOLLARS!!! Our retired seniors living on a ‘fixed income’ receive no aid nor do they get any breaks while our government and religious organizations pour Hundreds of Billions of $$$$$$’s and Tons of Food to Foreign Countries! They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? Imagine if the GOVERNMENT gave ‘US’ the same support they give to other countries. Sad isn’t it? 99% of people won’t have the guts to forward this. I’m one of the 1% — I Just Did.
I get the frustration
Out of the gate, I want to say, “I get it.” As someone who is fiscally conservative, skeptical of government waste, and committed to being a careful steward of both my financial resources and the facts, I have many concerns about how the government manages our tax money, including the FICA taxes.
I also know that many people feel like the system is unfair, inconsistent, or poorly managed. Many are anxious about Social Security’s long-term solvency, and with good reason. And almost all of us have paid into it our entire working lives, and we rightly expect to benefit from it for the rest of our lives.
Few topics stir up more emotion and confusion among retirees than Social Security. When viral posts circulate online claiming that the government has “renamed” Social Security, “stolen our money,” or “robbed us of a million-dollar retirement,” if they take those comments at face value, people feel betrayed. These posts spread quickly because they tap into a deep sense of individual ownership, responsibility, and injustice (and because social media is what it is).
But as strongly as these claims resonate, they’re built on misunderstandings (and sometimes bad math or outright falsehoods) about what Social Security is, how it works, and what it was designed to do. In this article, I want to walk through some of the most common myths I derived from the posts, explain what’s actually true as best I can, and offer a more balanced perspective for retirees and near-retirees who want to steward their benefits wisely.
For transparency, you should know that I approach this from a socially and fiscally conservative perspective. And my goal isn’t to judge, scold, or embarrass anyone for sharing these posts. Quite the opposite; I want to affirm the legitimate concerns many people have while also providing a more precise, fact-based understanding of the program.
Nor is it my goal to give a moral or ethical defense of the Social Security program and the ideology behind it, or to defend every decision Washington has ever made (I disagree with many of them)—far from it. I take the program as a “given” and go from there. I want to help us think clearly about this as Christian stewards who value truth, personal responsibility, and wisdom.
So, let’s take the myths and misunderstandings one at a time based on actual quotes from two “viral” social media quotes I found online.
Myth #1: “Social Security checks are now called ‘Federal Benefit Payments.'”
“The Social Security check is now referred to as a ‘Federal Benefit Payment.'” “This isn’t a benefit. It is our money paid out of our earned income!”
This claim has circulated for more than a decade and resurfaces every few years, especially during election cycles. The truth is much less dramatic. “Federal benefit payment” is simply an internal government transaction category used by the Treasury Department for all payments issued by the federal government, from veterans’ benefits to farm subsidies to tax refunds to Social Security.
The reality is that your Social Security award letter still says “Social Security Retirement Benefits.” Your SSA-1099 still says “Social Security Benefit Statement.” And your online account still says “Your benefit amount.”
The term “federal benefit payment” appears primarily in banking and Treasury rules governing direct deposits and garnishments. It’s not a new name being printed on your check or award letter.
There has been no renaming campaign, no political hanky-panky, and no conspiracy to re-label Social Security as a handout. It’s just accounting language.
But the outrage this myth stirs reveals something important: retirees want acknowledgment that they contributed to the system and earned the right to receive benefits. And, as we’ll see, that feeling is legitimate; there are many issues with the program as it currently exists.
Myth #2: “We paid 15% of our income into Social Security.”
“It totaled 15% of our income before taxes.” “Your employer contributed too — which means it was 15% of your income!”
This is a common misunderstanding. People often confuse FICA (15.3%) with Social Security—OASDI (12.4%). FICA includes both Social Security and Medicare. Here are the correct numbers:
- Social Security tax (OASDI) = 12.4%
- Medicare tax = 2.9%
- Total FICA = 15.3%
Workers pay half of each (6.2% of OASDI and 1.45% of Medicare, totaling 7.65%), and employers pay the other half. No worker has ever paid 15% of their income into Social Security. Historically, the rate was much lower: only 2% in the 1940s and 1950s, rising gradually to 12.4% in 1990 (6.2% for the employee), which is today’s level.
The total FICA withheld, including employer contributions, may have been 15%.
But an individual employee doesn’t contribute more than 6.2% to Social Security UNLESS THEY ARE SELF-EMPLOYED. In that case, they have to pay the full 12.4%.
One of the posts’ math assumes that every worker paid 15% of their earnings into Social Security for 40–50 years. This isn’t just inaccurate; it inflates their “if only it had been invested” calculations by 20–40% before they even start.
Another significant misunderstanding is treating Social Security taxes as a constant percentage of someone’s income when the program has always had a taxable wage cap. Once earnings exceed that cap, no additional Social Security tax is paid.
That means someone earning $500,000 in a given year pays the same dollar amount into Social Security as someone earning $80,000. Any calculation that assumes high earners pay 12.4% of their full income produces wildly overstated contribution totals.
In 2025, the Social Security wage base is $176,100, meaning no Social Security tax is paid on earnings above that amount. (The wage base adjusts annually for inflation.) This cap significantly affects the math in these viral posts, especially for higher earners. Someone earning $200,000 pays Social Security tax on only the first $176,100 of their income, not their full income. Medicare tax, by contrast, has no wage cap and applies to all earnings.
Finally, many of the dollar figures tossed around in these arguments don’t reflect economic reality. Average incomes for today’s retirees were far below $30,000 for much of their working lives; median household income didn’t reach that level until the early 1990s.
Myth #3: “It’s our money.”
“This isn’t a benefit. It is our money paid out of our earned income!” “They forgot (oh yes, they knew) that it was OUR money they were taking.”
Social Security taxes are indeed deducted from our earned income, and in that sense, we’ve “earned” the payments we later receive. But some people take this to mean: “It’s my money, and the government has no right to take it.” You could make that argument about any tax, but it’s hard to imagine a functioning, well-governed society without taxation of some kind.
The deeper issue here is really one of language and expectations, not government theft. Once Social Security taxes are collected, they don’t go into a personal investment account with your name on it. They flow into two trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. At that point, the money belongs to the program, not to you individually.
That’s why economists describe Social Security as “pay-as-you-go,” not a personal retirement plan. Your contributions aren’t optional; you can’t increase or decrease them at will, and they aren’t saved or invested on your behalf the way a 401(k) contribution would be.
You do have a Social Security account, but it’s mainly for administrative purposes. You can see your earnings history, your taxes paid, and your estimated future benefits. What you won’t see is a cash balance in your own name, because none exists. Social Security was never designed to be a personal investment account. It is a social insurance program, and that distinction matters.
When you were 45, your taxes helped pay for someone who was 65. When you’re 70, the taxes of today’s workers will help pay for yours. You may think that’s unfair, but it’s how the system was built from day one to protect against poverty, disability, and premature death.
None of this means you didn’t “earn” your benefits. You absolutely did. But it does mean that Social Security does not operate like a 401(k) or IRA. If your mental picture is that the government is holding your contributions in a private account, spending them, and refusing to pay you back with interest later, that’s not how the system works.
The program works for everyone because everyone pays in, but not everyone collects the same amount. Some retire early and claim smaller payments. Some die before claiming anything. Others live 25–30 years in retirement. This creates what actuaries call a “risk pool.”
Workers of all ages pay into the system. The trust funds are invested in U.S. Treasuries, which pay interest. Retirees draw benefits from that pool. Those who die earlier effectively subsidize those who live longer. These are called “mortality credits,” the same mechanism that makes lifetime annuities possible.
This isn’t theft, it’s how every insurance system operates—whether car insurance, homeowners coverage, life insurance, or annuities.
If everyone got back only what they personally paid in—no more, no less—the program wouldn’t be insurance at all. It would simply be a personal savings plan with much smaller benefits. Social Security works because it spreads risk across millions of people, providing a safety net for those who contribute modestly or live long lives.
Mortality credits are what make lifetime, inflation-adjusted income possible without requiring each person to save hundreds of thousands of dollars on their own. That’s precisely the point of the system.
Myth #4: “If we could have invested our contributions, we’d all be millionaires.”
“At a meager 1% interest, you’d have more than $1.3 million saved!” “At 5%, you’d have $892,919.98 after 49 years!” “That’s almost three times more than today’s average Social Security benefit of $1,230 per month.”
On the face of it, the scenarios in the posts seem compelling. But the math and most of the assumptions behind it are deeply flawed—and some of the numbers are simply wrong.
First, let’s address the outdated benefit figure. The viral post claims the average Social Security benefit is $1,230 per month. That’s significantly outdated. As of January 2025, the average monthly Social Security retirement benefit is $1,976—about 60% higher than the post suggests. This matters because it undermines the entire premise that private investment would deliver “three times” what Social Security pays.
The first big problem is that one of the interest calculations is totally wrong. One post claims that contributing $375/month for 40 years at 1% interest would produce $1.3 million. The actual number is approximately $221,000, not $1.3 million. That’s off by more than $1 million!
I suspect this was a typo: the math does work if you replace 1% with 7% annual returns. At 7%, you would indeed accumulate about $1.3 million over 40 years with $375/month contributions. So I’ll give the writer the benefit of the doubt here. But this highlights a critical problem: to generate the impressive numbers these posts cite, you need stock market returns (historically 7-10%), not the “safe” 1% returns they claim. And stock market returns are characterized by significant volatility and risk—exactly what Social Security was designed to eliminate.
The 5% example (and the replacement of 1% with 7%) is also problematic. For most of the last 20 years, savings accounts have paid 0%–2%, CDs have paid 1%–3%, and short-term Treasuries have averaged under 2%. (It’s only been recently—in the last few years, since the pandemic—that interest rates have risen to levels not seen in over two decades.)
To earn 5% consistently, you’d have to take stock market risk, which exposes your future retirement income to volatility and timing (a/k/a “sequence of returns”) risk, which are risks Social Security was explicitly created to remove. (Remember, it was instituted on the heels of the worst stock market crash in U.S. history.)
Perhaps the most significant misunderstanding is that Social Security isn’t designed to be an investment account in the first place. Social Security is insurance against outliving your savings and becoming disabled; for your spouse and children if you die young; inflation-adjusted payments for life; and progressive, meaning that lower earners receive a proportionally larger share. An investment account cannot replicate these benefits at a cost even close to the same.
If you wanted to buy an equivalent inflation-protected lifetime annuity, it would require ≈ $750,000 at retirement. Most people could not save that amount on their own, especially at 6.2% of their income.
If you tried to replicate Social Security privately, the results would be revealing.
Imagine a worker who earned an average of $50,000 per year for 30 years and paid the employee share of Social Security tax—6.2% of wages, or $3,100 annually. Over a whole working career, that totals $93,000 in lifetime contributions from their own earnings. (Note: This is an illustrative example; actual benefits vary based on complete earnings history, claiming age, and other factors.)
In return, Social Security provides a benefit of ≈ $30,000 per year (≈ $2,500 per month) starting at age 70. Over a 20-year retirement, that adds up to ≈ $600,000 in guaranteed, inflation-adjusted lifetime income.1
Various annuity calculators suggest that, at today’s rates, you’d need on the order of $700,000–$900,000 in savings to buy a CPI-linked lifetime income of around $30,000/year at age 70, depending on assumptions.2
If they invested their $3,100 per year in Social Security employee contributions at 5% (which is impossible to achieve with no risk), they would accumulate ≈ $206,000 after 30 years.
The reason for this difference is simple: Social Security is not a personal investment account. It’s a social insurance program built on risk pooling, mortality credits, inflation indexing, and lifetime guarantees that private investments cannot replicate at the same cost. In other words, Social Security delivers far more retirement security per dollar contributed than a private investment strategy using the same contribution level could ever provide.
Myth #5: “Social Security is a Ponzi scheme.”
“They’ve pulled off a bigger Ponzi scheme than Bernie Madoff!”
A Ponzi scheme promises investment returns but pays earlier investors with new investors’ money until it collapses.
Social Security isn’t based on promised investment returns. It is — and always has been — a pay-as-you-go social insurance program. Today’s workers fund today’s retirees, just as we funded the generation before us. That’s how nearly all pension plans initially worked.
Could the system be better funded? Absolutely. But long-term demographic pressure does not make it a Ponzi scheme.
You can honestly criticize Social Security’s long-term finances without calling it fraud. It’s a pay-as-you-go tax and benefit program enacted by Congress, not an illegal investment scam.
Myth #6: “The government stole our money and didn’t pay interest.”
“They borrowed our money and never paid it back!” “They didn’t pay interest on the debt they assumed.”
This is emotionally powerful but factually incorrect.
By law, excess Social Security payroll taxes must be invested in interest-bearing, special-issue Treasury bonds. The trust fund earns interest every year, and the Treasury redeems those bonds when benefits come due.
This isn’t “stealing.” It’s how nearly every large pension fund in America works: they invest in Treasury securities (or perhaps investment-grade corporate bonds) for stability and liquidity.
Would investing in the stock market have produced higher returns? Almost certainly. But it also would have introduced volatility and market risk, and retirees would be the first to suffer in a market crash.
Myth #7: “People who die early lose their contributions.”
“What about people who died before collecting — WHERE DID THAT MONEY GO?”
This is partially true. Yes, a deceased person no longer receives benefits (well, I understand some do…it’s called FRAUD). But if they’re married, their spouse may receive survivor benefits equal to the deceased’s, provided they exceed the spouse’s.
In reality, the money the deceased would have received didn’t go anywhere. It’s still in the trust fund and will be used to provide survivor benefits or benefits to others who live longer. This reveals one of the biggest misunderstandings about Social Security. And ironically, it points to the very thing that makes Social Security work.
To repeat, Social Security is insurance, not a personal savings account. You buy life insurance because you hope you never need it. If you have a 15-year term life insurance policy, you probably wish you make it to the end of the term without having to receive a life benefit (which would mean you have lost your life).
Did you like paying the insurance premiums all those years? Probably not. Were you glad when the term was over, and you hadn’t received a death benefit? Probably so.
Life insurance, annuities, and Social Security all work because some people live longer than average, some die earlier than average, and although everyone pays in, not everyone gets the same amount back. Social Security uses risk pooling, just as life insurance and annuities do. This is what allows it to pay a lifetime income you cannot outlive, even if you live to 100.
You may not like that kind of system because of the way it “spreads the goodness around.” I understand; I’m just explaining how it works.
If everyone got back exactly what they contributed, Social Security would no longer be insurance; it would be a savings plan. It would cost far more to provide the same lifetime protections.
Myth #8: “Social Security isn’t an entitlement — I paid for my benefits!”
“Entitlement my b..t, I paid cash for my social security insurance!” “They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives. . .”
This sentiment is understandable. Retirees did pay into the system. But “entitlement” in public policy doesn’t mean welfare or charity—getting something we didn’t pay for—it simply means that, under the law, you are entitled to receive a benefit if you meet the eligibility requirements.
Social Security is not a direct refund of your contributions. Benefits are calculated using an indexed lifetime earnings formula, not your exact dollar contributions. And on average, retirees receive significantly more in lifetime benefits than they contributed, especially once inflation-indexed, spousal, and survivor benefits are included.
You earned it, but you earned it through participation in a system, not through personal investment growth.
So yes, you have an earned claim on the system. But on average, your lifetime benefits likely exceed your lifetime contributions, not the other way around.
Myth #9: “Foreign aid and congressional benefits are why Social Security is in trouble.”
“We’re broke and can’t help our own seniors…” “Imagine if the government gave us the same support they give foreign countries.”
It’s no secret that the Social Security Trust Fund is in trouble. And you know my concerns about the federal debt. So, yes, technically, we’re “broke” if we mean that we owe more (in current and future liabilities) than what we’re taking in, which is true of both general tax revenues and Social Security taxes.
It would be more accurate to say that Social Security is becoming “insolvent,” meaning the program is approaching the point where the assets of the trust funds will be exhausted, and annual program costs exceed annual program income, resulting in an inability to pay full scheduled benefits.
According to the 2025 Social Security Trustees Report, the combined Old-Age and Survivors Insurance and Disability Insurance (OASDI) trust funds are projected to be depleted by 2034—one year earlier than the previous projection. The retirement fund (OASI) alone is projected to be depleted in 2033. At that point, if Congress takes no action, the program would still be able to pay about 81% of scheduled benefits from ongoing tax revenues. (It could continue to pay these partial benefits indefinitely with monthly OASDI tax withholding revenues.)
If you read my article on Bitcoin and the federal debt, you’ll remember that the three largest expense categories for the federal government are Social Security, Medicare, and interest on the debt. Foreign aid and congressional benefits don’t appear in the top 10 expense categories.
Foreign aid represented about 1.2% of federal spending in fiscal 2023—roughly $61 billion out of a $6.1 trillion budget. Congressional salaries and benefits are a tiny fraction of that—literally a rounding error in a multi-trillion-dollar budget. For context, Social Security alone accounts for about 21% of the federal budget, and Medicare another 14%. Neither foreign aid nor congressional compensation has anything meaningful to do with Social Security’s long-term financial viability. The math doesn’t work.
And by the way, the post’s description of congressional pay and perks is also exaggerated, but that’s beyond the scope of this article.
That said, yes, Social Security is facing significant funding challenges and will require congressional action. There are many causes for this, such as falling birth rates, longer life expectancy, and lower worker-to-retiree ratios, all of which translate into fewer people paying in than those collecting benefits.
It’s mainly demographics, not foreign aid, that drives the numbers.
Facts matter
I concede that Social Security is far from perfect, and there are honest debates to be had about how to strengthen it for future generations. But we can’t have those debates if our understanding is shaped by viral social media posts filled with inaccurate numbers, overly dramatic claims, and emotional rhetoric.
You paid into Social Security. You earned your benefits. But you earned them by participating in a national insurance program, not by accumulating a personal investment account. And that key distinction matters because it explains how Social Security works, what it can (and cannot) do, and how it fits into a faithful, wise approach to retirement stewardship.
- According to Andrew Biggs of the American Enterprise Institute, “The key piece of data is this, courtesy of the Congressional Budget Office: Americans born in the 1960s and hitting age 65 over the next decade are promised an average of 33% more in Social Security benefits than they paid over their lifetimes in taxes, including interest on those taxes.” (Note: If you have more than a passing interest in the topic of Social Security reform, I would encourage you to read the work of Andrew Biggs of the AEI. Here’s the article that the above quote was taken from: https://www.aei.org/articles/fixing-social-security-without-raising-taxes-cutting-earned-benefits-or-endangering-the-poor/) ↩︎
- According to https://www.taxpolicycenter.org/publications/social-security-and-medicare-benefits-and-taxes-2023, a single male earning an average wage every year and who retired in 2020 at age 65, lifetime Social Security and Medicare benefits would equal about $640,000, while total taxes paid would be just shy of $470,000. But as I’ve said, some will receive much more and some much less, depending on how non-average they are. ↩︎