To test your understanding of Social Security, try this short quiz:

1. How much money is in the Social Security trust fund?

2. How much money have you saved in your Social Security retirement account?

3. How much money are you guaranteed to receive in monthly benefits when you retire?

The answer to all three questions is the same: None.

Let's take them in turn.

1. There is no money in the Social Security trust fund. It is true that the Social Security trustees reported holding "asset reserves" of $2.8 trillion at the end of 2023. But those assets are an illusion. Social Security doesn't own $2.8 trillion in gold bullion or shares of stock or real estate or cash. All it has are Treasury bonds — IOUs from the federal government for money that the government has already spent. Between 1983 and 2009, the Social Security system ran surpluses, collecting $2.8 trillion more in payroll taxes than it paid out in benefits. But that money wasn't saved. It wasn't walled off in a lockbox to fund benefits for future retirees. It was simply added to the government's general revenues and used for other federal programs. In other words, the government lent itself the money in exchange for a promise to pay itself back — the equivalent of writing yourself a check to deposit in your checking account. The IOUs in the trust fund are merely an accounting device, nothing more.

As the Office of Management and Budget acknowledged in a candid 2000 report, Social Security's trust fund balances "do not consist of real economic assets that can be drawn down in the future.... Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."

2. You have no money saved in your Social Security retirement account. For many years, the Social Security Administration has provided American workers with an annual personalized statement listing their earnings history and the amount of Social Security (and Medicare) taxes paid over the course of their working career. Many Americans imagine that their Social Security number is linked to the funds that they have been paying into the system since they earned their first paycheck. They're wrong about that, but they can hardly be blamed for believing it.

From the start, Social Security was promoted — falsely but persuasively — as a straightforward pension fund. "We have set up a savings account for the old age of the worker," Franklin D. Roosevelt told Pennsylvania voters in 1936. He said the accounts, to be funded with contributions from both employers and employees, would be "held by the government solely for the benefit of the worker in his old age." FDR was propagating a fable countless Americans have embraced ever since — that the money they pay into Social Security has been saved and invested on their behalf, to be returned to them in monthly benefit checks when they retire. That has never been true. Social Security is a pay-as-you-go scheme: Benefits disbursed to retirees today are funded not by the money withheld from their paychecks through the years but from the payroll taxes collected from current workers.

3. You are not guaranteed any amount of money in benefits when you retire. For all their differences during the presidential campaign, Donald Trump and Joe Biden and Kamala Harris were in adamant agreement on one thing: that Social Security benefits are sacrosanct and must not be cut by "a single penny." But retirees have no ironclad right to that monthly check. "Congress can change the rules" whenever it wants to, as even the Social Security Administration's website concedes, and "benefits which are granted at one time can be withdrawn." As early as 1937, the Supreme Court ruled that payroll taxes go to the Treasury like all other revenue "and are not earmarked in any way." The justices reiterated in 1960 that there are no "accrued property rights" in the Social Security system.

Nothing about Social Security is guaranteed. Congress can reduce benefits, raise the retirement age, increase withholding taxes, or scale back cost of living adjustments. Over the years it has changed the parameters of the program scores of times. "The idea that Social Security taxes and benefits are immutable and can never be revisited," remarks Brian Riedl of the Manhattan Institute, "is wildly ahistorical."

Social Security is swaddled in elaborate myths, but at bottom it is simply a vast government transfer program, taxing money away from one segment of the population — working people — and redistributing it to another segment: retirees. But Social Security is distinguished from other transfer programs in several critical ways.

First, it is almost inconceivably enormous. Social Security consumes more than one-fifth of this year's $6.9 trillion federal budget. By a wide margin, the government spends more on Social Security than on anything else — it is $550 billion more costly than national defense, the second-largest budget item.

Second, because Social Security has always been funded primarily with payroll taxes, it is unsustainable. When the program began, there were 160 workers paying into the system for every retiree taking benefits out of it. But that ratio has plummeted. Today there are about 2.5 workers for each retiree, and the number is still dropping. Within a decade, payroll taxes will cover only 77 percent of scheduled benefits. At that point, unless the law is changed, benefits will have to be cut by 23 percent. Everyone in Washington can see the looming crisis. Yet Republicans and Democrats stubbornly insist that changes to Social Security are "off the books." One way or another, though, changes must come.

Perhaps the most important change of all would be to acknowledge that Social Security has outlived its original purpose. When the program began in 1935, the elderly were the poorest age group in America. Today they are the wealthiest. As Riedl points out, "seniors have the lowest poverty rate of any age group and their average household incomes have grown four times as fast as the average worker since 1980." In FDR's day, there were no IRA and 401(k) accounts, few Americans owned stocks, and the average lifespan was too short for most people to accrue significant wealth. Now that that has changed, does it really make sense to keep taxing younger, poorer workers in order to pay benefits to retirees who are far better off than they are?

For 40 years, Social Security has been called the "third rail" of American politics. It doesn't have to be. If just a few responsible political leaders would step up to take the lead, the nation's most gigantic spending program could be refashioned for the 21st century. With a few relatively straightforward reforms, low-income seniors could be protected while the young could be empowered to build more wealth for themselves. Most Americans understand that Social Security needs fixing. The best way to start is by sweeping away the mythology that has made it so confusing.