Dear Rusty: I have heard that when my wife and I pass, the government keeps all we have paid into social security. Is this correct? Signed: Curious Senior 

Dear Curious: The Social Security taxes paid while you and your wife were working weren’t deposited into a personal account for each of you; rather they were used to pay benefits to those collecting Social Security at the time. That’s the way the program has worked since enacted in 1935 and the way it still works today. The money you contributed has already been used to pay benefits to others. However, hopefully you and your wife will live to claim your own benefits, and what you get when you claim will be based upon your earnings record over your entire lifetime (up to earnings you paid Social Security FICA payroll taxes on). Those historical earnings are adjusted for inflation and your lifetime average monthly earnings amount is determined, from which your base benefit is calculated. Just as you and your wife helped pay for those getting SS benefits while you were working and paying into Social Security, those now working and paying into the program will help pay benefits to you and your wife. You may be interested to know that studies show most workers get back everything they’ve personally contributed to Social Security within about 3 to 5 years of starting their benefits. One study I’m familiar with looked at how long it would take the average Social Security recipient who starts benefits at full retirement age (FRA) to get back money equal to what they paid into SS. That study looked at four different hypothetical earners – one who earned only half of the national average wage index (AWI) for their lifetime; another who earned 100% of the national AWI for their lifetime; another who earned 150% of AWI for their lifetime; and yet another who earned the maximum annual payroll tax cap for their entire lifetime. The study then figured how much each of those individuals would have paid in Social Security payroll taxes over their 35 highest-earning years (which is what SS benefits are computed from). Then, the study looked at what their SS benefit would be at full retirement age and calculated how long it would take for each to recover the Social Security FICA taxes paid over their lifetime. The analysis revealed that the lowest earning beneficiary would get back everything paid into Social Security within about 34 months, and the highest earning beneficiary would get back everything paid within about 63 months. For clarity, this study looked at employed workers who pay Social Security FICA taxes; those who are self-employed and who must pay both the employee and employer portion of SS tax must collect benefits longer to break even. 

So, the answer to your specific question is that the money you and your wife contributed to Social Security while you were working has already been used to pay benefits for others who were getting benefits at the time you paid into the program. Hopefully, by the time you and your wife pass you both will have received considerably more in Social Security benefits than the taxes you paid into the program while you were working. If you were an employee, you only need to collect benefits for about 3 to 5 years to be ahead of the game.

One final note for those who contend they could do better investing that money on their own: Not paying Social Security tax on employment earnings isn’t a personal option. 

Russell Gloor is an Association of Mature American Citizens certified social security advisor.  To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.