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Really! How healthy is our social security system? 

So we are continuing our month long series on SS this week . This is our 2nd episode so if you missed number one go back and listen to it right now! 

Today, we are going to talk about the health of SS and also tackle some of the rumors that are floating around.

Rumor: Social Security going broke

No doubt it faces some funding challenges but not immediately and definitely not bankruptcy.  So where did this rumor start? My guess is as usual the media! Back in 2012 the SSA put out a statement and the media ran with it! However they didn't really give the full story.  What was the statement

"Monday, April 23, 2012 News Release…

"The projected point at which the combined Trust Funds will be exhausted comes in 2033 – three years sooner than projected last year.  At that time, there will be sufficient non-interest income coming in to pay about 75% of scheduled benefits."

But that wouldn't leave SS bankrupt. It does however state that if no fixes take place and congress does nothing. The benefits would be cut back and payroll taxes would pay about 75% of the benefits starting in 2033.

What are some other possible fixes congress may do in the future?

1. Possibly adjusting the FRA (full retirement age) to 70 for younger workers
2. Payroll taxes could go up! 
3. Adjust the way they calculate to COLA each year
4. Earnings restrictions for individuals currently claiming social security benefits early and still working may change.

Rumor: Retirees lose benefit's forever if they work while collecting at the same time.

 This comes from the fact that if you claim benefits early while you're still working some of those benefits will be withheld.  Called earnings restrictions. The benefits are withheld but not lost forever. When your reach your FRA SS admin will recalculate your monthly benefit, bumping it up to give you credit for all those benefits that were withheld. Over time you will recoup those benefits (granted if you live long enough). 

Rumor: President Roosevelt promised that the annuity payments to the retirees would never be taxed as income

Originally, Social Security benefits were not taxable income. This was not, however, a provision of the law, nor anything that President Roosevelt did or could have "promised."

It was the result of a series of administrative rulings issued by the Treasury Department in the early years of the program.

In 1983 Congress changed the law by specifically authorizing the taxation of Social Security benefits. This was part of the 1983 Amendments, and this law overrode the earlier administrative rulings from the Treasury Department.

Practical Planning segment

1. Turn off the hype! One of the main reasons I decided to create this podcast was to educate and really try help people focus on what really matters and turn off the media hype that stokes the fears and flames the emotions of investors.
2. Don't rush into a decision. This is a major financial decision that should not be taken lightly
3. Do your own research on reputable web sites
   1. SSA.gov
   2. AARP.ORG

 Coachable Segment

What Counts as a rumor and why do people spread them?

What Counts as a "Rumor"?

Let's start by defining what we mean by a "rumor" in the same way social psychologists have. Nicholas DiFonzo and Prashant Bordia describe four basic qualities of rumors:

1. They are information statements. We're not talking about the opinionsthat people share. Instead, rumors are meant to be informative.
2. They are in circulation. In other words, if you have your own personal conspiracy theory that the moon isn't real, it's not a rumor if you never tell anyone.
3. They are unverified. This is key. If I'm at a high school reunion, and I try to spread the news that Jeff and Tina just had a baby[1], that's not a rumor if Jeff and Tina posted the baby's picture to Facebook. Yes, it's informative and in circulation, but since it's been definitively verifiedas true, it's not technically a rumor.
4. Finally, rumors are "instrumentally relevant." They answer questions that people want answered because they feel important or significant. If there's a rumor that your office is laying people off, that's instrumentally relevantbecause that information impacts your life! Some have called rumor spreading a "group sensemaking activity" because they serve to help people understand an ambiguous situation.

Why do people spread rumors?

1. People Spread Rumors When There's Uncertainty

It's when we don't already have a firm grasp on how or why things are happening in the world that rumors start to spread. There's a ton of uncertainty there, so people would probably develop and spread rumors as a way to get a handle on what happened. In fact, a field experiment in 1955 did just that: the researchers strategically withdrew a student from a grade school class without explanation. Not surprisingly, rumors started to fly as students tried to make sense of the situation.

2. People Spread Rumors When They Feel Anxiety

Oftentimes uncertainty breeds anxiety—we like to have a clear sense of the world, and we get anxious when we feel uncertainty—and anxiety on its own has been linked to rumor spreading. Some research has shown that more anxious people tend to be the ones who are more likely to spread rumors.

3. People Spread Rumors When the Information is Important

As much as you might be dying to talk about the rumor you heard about the company you work for, I probably don't care a ton. The reason is that it's just not that relevant to me. I, on the other hand, would be itching to talk about some other rumor that's more important to me. In fact, Allport and Postman's "basic law of rumor" that they developed in 1947 was that spreading rumors depends on both the ambiguity of the situation and the importance of the rumor.

Across a whole bunch of studies, people are more likely to spread rumors when the information is more important to them.

4. People Spread Rumors When They Believe the Information

Let's face it—if you hear a rumor that you think is completely ridiculous, you probably won't find yourself on a mission to spread that information far and wide. For example, one study looked at the spread of rumors during a university strike. It was the rumors that were more believable that ended up spreading the most.

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