Monday, September 20, 2010

Think You Have a Legal Right to Social Security Benefits? Think Again!

Think You Have a Legal Right to Social Security Benefits? Think Again!

Whenever I meet with prospective clients regarding their retirement income planning – and our other strategists have similar experiences – one of the first steps is identifying their sources of anticipated future income. To a person, virtually everyone identifies Social Security as their first source. And usually their perception is something along the lines of: “The system OWES me that income; they MUST pay it to me. It’s my LEGAL RIGHT!”

Well, I don’t know how to break this to you, but I’ll do my best to explain it in simple terms. If you think your past payments of Social Security taxes legally entitles you to benefits, you're dead wrong! Yes, by that, I mean: the fact that this money is regularly withdrawn from your paycheck does not give you a right to retirement benefits.

“WHAT ARE YOU TALKING ABOUT???” you’re likely wondering right now. “Who says so? Of course I’m entitled to that money – it’s MY money!”

You regular readers probably know by now that I don’t just say stuff without backing it up with FACTS. So here are the facts.

The plain and simple answer is that the U.S. Supreme Court established this in a 1960 case – FLEMMING v. NESTOR, 363 U.S. 603. In that case, Mr. Nestor argued through his attorneys, among other claims, that his promised Social Security benefits were a contract, and that Congress could not legally renege on that contract. You may be thinking and feeling similarly, right? I mean, those FICA taxes fly out of your paycheck without any mercy. However, the shocking truth is that in its ruling, the U.S. Supreme Court rejected this argument and established the principle that entitlement to Social Security benefits IS NOT a contractual right.

Interestingly enough, of all the places you can go to research this subject, the Social Security Administration has perhaps the best summary and comments on this case. Read a couple key word-for-word quotes below:

“Like all federal entitlement programs, Congress can change the rules regarding eligibility – and it has done so many times over the years. The rules can be made more generous, or they can be made more restrictive. Benefits which are granted at one time can be withdrawn…”
Read the next sentence, also from the Administration very, very carefully.

“There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense.”
I did not major in English, and neither am I a lawyer, but from a layman’s perspective, that statement is pretty straightforward, isn’t it? Look, you do not have a legal right to Social Security benefits, period! ZIPO legal right.

Just for an an added layer of confirmation, here’s a Congressional Research Service report that was prepared for members of congress by Kathleen S. Swendiman and Thomas J. Nicola, both legislative attorneys. The summary of their report says that the Supreme Court has made clear in court decisions subsequent to Flemming v. Nestor that the payment of Social Security taxes conveys no contractual rights to Social Security benefits.

This is an important thing you must understand as you plan for your retirement. Strangely enough, I am not sure how many so-called financial professionals even know and understand that Social Security is not legally guaranteed, regardless of how much you’ve paid into it.
For a no-obligation, complimentary consultation to examine your anticipated retirement income, call Laser Financial Group at 301.949.4449 or visit us on the Web.


  1. this is a truly good blog. i am learning a lot from you every time Mr. Samuel Asare.

  2. Good information Sam! Most people are too busy working and spending to find out what is going on around them. Some also don't want to know, until that time come and hit them hard. Most people don't have a clue about SOCIAL SECURITY.


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