An article titled “Six Scams that Prey on the Elderly” that appeared on Kiplinger.com last year has recently been reposted on Pocket. Although there is a Social Security scam that the author (Miriam Cross) mentions as one of the six, the fact that Social Security itself is a scam is never mentioned.
“Many scams are universal,” begins Cross, “from the IRS impostor who calls and threatens to arrest you if you don’t pay your taxes, to phishing emails that trick you into sending sensitive data or downloading malware onto your computer.”
But some scams specifically target the elderly.
“Older adults may fall for certain scams because they are in the habit of answering calls from unknown callers, open junk mail rather than tossing it in the trash, or are not as practiced with the privacy settings on social media as younger generations.” Larry Santucci agrees. He co-authored a report about elder financial victimization for the Federal Reserve Bank of Philadelphia. “Older adults make great targets because they have accumulated assets over time and are living off their savings. Some are also very lonely or socially isolated, which makes them susceptible to exploitation.”
“Here are six scams that you and your parents should watch out for,” warns Cross.
Sweepstakes or Lottery: You are told that you have won or could win a jackpot, but you need to pay a fee to receive your prize.
Tech Support: A so-called tech support representative calls and claims that your computer is infected with a virus and requests remote access or payment for virus removal services.
“Grandchild” in Need: Someone claiming to be your grandchild calls — sounding frantic — because he needs cash to deal with an emergency.
Romance: You get a message online that says something like “Don’t you remember me?” A seducer then spends time building a relationship before asking for money.
Natural Disasters and Contractors: Fake contractors will go door-to-door offering fix-it services, ask for instant payment, promise to start working the next day, and then disappear.
Social Security: Someone claiming to be a Social Security staffer contacts you and tries to extract money or personal details by pretending that there is a problem with your account, that your Social Security number has been suspended, or that you’re owed a cost-of-living benefit increase.
No doubt some seniors have fallen for one or more of these scams. But the greatest scam that seniors have fallen for is the scam of Social Security — not a scam involving someone claiming to be from the Social Security Administration, but the scam of Social Security itself.
Here are the six scams of Social Security that most seniors in the United States have fallen for.
Social Security has a trust fund.
Most Americans believe that there exists somewhere an account in the Social Security trust funds with their name on it. The truth, however, is that the Social Security trust funds are government accounting fictions. There are no reserves in an account for people to draw from. There is no lock box. All Social Security benefits are paid from current taxes collected, as the Social Security Administration (SSA) acknowledges. The “trust fund” is just a gigantic IOU from the U.S. Treasury. Furthermore, since 2010, total expenditures of Social Security have exceeded the non-interest income of its combined trust funds. That is because the ratio of those paying into the system to those collecting benefits has declined from more than forty to one down to about three to one. According to Social Security’s Annual Report, the trust funds “would be able to pay scheduled benefits on a timely basis until 2035.” After that, “the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 79 percent of scheduled benefits.” The reality is that the Social Security deficit is made up from the federal government’s general fund. But, again, there is a problem. Federal budgets are now about $5 trillion a year, annual budget deficits are more than $1 trillion, and the national debt is now more than $27 trillion. Social Security is not just underfunded, it is unsustainable.
Retirees are entitled to Social Security benefits.
Most Americans believe that retirees are entitled to Social Security benefits because they paid into the system their entire working lives. But the Supreme Court has ruled that there is no contractual right to receive benefits. Congress can revise the Social Security benefit schedule at any time, use a means-test to determine eligibility, raise the Social Security tax rate, increase or eliminate the wage base upon which Social Security taxes are figured, raise the retirement age, or increase the percentage of benefits that are taxable. And if Americans are entitled to Social Security benefits, then why does the government tax them in the first place?
Social Security benefits are related to the amount of Social Security taxes paid.
Social Security is funded by a 12.4 percent payroll tax (split equally between employers and employees) on the first $137,700 of employee income. Self-employed persons pay the full 12.4 percent, but receive a tax deduction equal to 50 percent of the amount of the Social Security tax they paid. One must pay Social Security taxes for a minimum of 40 quarters, or 10 years, to be eligible for benefits. But there is no relation between taxes paid and Social Security benefits received. Benefits are figured on the basis of one’s Primary Insurance Amount (PIA), the average of a worker’s 35 highest years of earnings (up to a particular year’s wage base), adjusted for inflation; in other words: the benefits are calculated by some arbitrary formula that Congress can change at any time.
Social Security is a good investment.
Although Ida Mae Fuller, the first recipient of Social Security, paid in only $24.75 and received $22,888.92 in benefits (she lived to be 100), for many years now Social Security has been a bad investment. Many workers who pay into Social Security end up with a negative annual rate of return. A report by the Heritage Foundation concluded that “Americans would be better off keeping their payroll tax contributions and putting them into private retirement accounts than having to sacrifice them to the government’s broken Social Security system.” Politics has nothing to do with it. It is just a matter of simple math. Economist Walter Williams once did the math and pointed out that a man reaching age 65 in the year 2000 could expect to receive $71,000 more in government transfer payments (of which the largest amount is Social Security) than he paid in taxes. But a 20-year-old man who entered the workforce in the year 2000 could expect to pay $312,000 more in taxes than he would ever receive in benefits. A man can pay into Social Security his whole working life and, if he dies upon retirement without dependents, his Social Security benefits die with him. Although Social Security is presented as retirement insurance for which one pays premiums or contributions, it is not a retirement plan, an insurance program, a savings account, a 401(k)-type account, an IRA, an investment vehicle, a pension fund, an annuity, or a safety net.
Senior citizens can’t make ends meet without Social Security.
Most Americans believe that without Social Security senior citizens would be impoverished, go hungry, and die in the streets. But according to the IRS, incomes for households whose members are 65 and older grew more than twice as fast as working-age households. Seniors as a group are now one of the richest segments of the population. According to the Federal Reserve, “Among households age 55 to 69, retirement savings grew from 232 percent of annual earnings in 1989 to 471 percent in 2016.” And according to the SSA, “Americans born between 1926 and 1935 had a median retirement income equal to 111 percent of their inflation-adjusted career-average earnings.”
Social Security is not welfare.
When most Americans think of government welfare programs they usually have in mind the Supplemental Nutrition Assistance Program (SNAP, formerly called food stamps); Temporary Assistance to Needy Families (TANF); Supplemental Security Income (SSI); Medicaid; the Children’s Health Insurance Program (CHIP); Section 8 housing vouchers; or Women, Infants, and Children (WIC). Some Americans would also include refundable tax credits, Medicare, and unemployment compensation. Few Americans recognize that Social Security is also a welfare program. It is the cornerstone of the welfare state, a relic from the New Deal, the largest welfare program, and the greatest expenditure of the federal government. Like any welfare program, Social Security fosters dependency on the government, crowds out real charity, shifts responsibility from the individual to society, shifts responsibility from families to the state, and contributes to class warfare. Social Security is an intergenerational, income-transfer, wealth-redistribution welfare program that takes money from those who work and gives it to those who don’t.
Social Security is the biggest government scam that has ever existed.