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Debunking Common Social Security Myths

Social Security will celebrate its 80th birthday on August 14, 2015. In honor of eight decades of the program, let’s look at some of the common urban legends about one of America’s most popular government programs. Which of these “facts” have you fallen for?

1. 65 was chosen as Social Security’s standard retirement age because of a German Chancellor.

At some point in school, you probably learned that the very first social insurance program was created by German Chancellor Otto von Bismarck in 1889. You may have also heard that Bismarck himself was 65 years old at the inception of Germany’s program, which is why 65 has been the default retirement age ever since.

As cool as this fact sounds, it’s actually wrong on three counts. First, Bismarck was 74 in 1889, and so his age had no bearing whatsoever on the age chosen for retirement benefits to kick in. Second, Germany originally set the retirement age at 70 rather than 65, and did not lower the age until 1916, at which point Bismarck had been dead for 18 years. Third, the American designers of Social Security based their recommendation for retirement at 65 upon actuarial studies and the standards of domestic private pension programs–not how Germany or any other country set up their system.

2. Identifying information is encoded in your Social Security number.

When I was a child, my father once told me that the middle two digits of your Social Security number represent the year you were born. It was a natural assumption for him to make, since the middle two digits of his SSN matched up with his birth year. But it was incorrect. (And I memorized my Social Security number incorrectly as having 79 as the middle two digits because of his offhand remark.)
Although my father’s assumption about coded information is not a common one, plenty of myths abound about how the nine digits that comprise a Social Security number categorize the cardholders. One of the most repeated myths is that the middle two digits, which are known internally in the SSA as the group number, indicates the race of the individual holding that number. As it happens, the group number is simply a bookkeeping tactic created to help subcategorize numbers in the pre-computer world.
And even though the first three digits are both referred to as the area number and are assigned geographically, they were never intended to be anything more than another method of bookkeeping, and there is no database of geographically coded Social Security numbers.

3. Social Security was designed so that most people would not live long enough to collect benefits.

I have to admit that I have fallen for this particular myth on more than one occasion. That’s because actuarial tables from 1930 show an average lifespan of 58 for men and 62 for women. What I and other laypeople fail to take into account is the fact that actuarial tables show average lifespan, meaning high infant mortality skews the numbers lower. Someone born in 1930 who lived to adulthood had a much better chance of making it to age 65–and receiving benefits–than the tables seem to show.

The Bottom Line

It’s human nature to mythologize something that has been around for longer that we (or our parents) can remember. But when the myths you believe are about a major government program, it’s a good idea to separate the fact from the fiction.

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