Dear Rusty: Hypothetically, if I plan to sign up for Social Security at 70 and pass away before that, I will get nothing. My spouse would still get a boost in the amount she receives because I made more, but everything I put into the program vanishes. I haven’t reached my full retirement age yet and I still have income, but if I sign up now at 63 my benefits will be withheld due to my income. Then at full retirement age (presuming I elected to claim earlier) a re-calculation will take place and my monthly amount would be adjusted. Well, what happens if I decide to wait until 70 but pass away before I claim? Are my contributions repaid in a lump sum, or will I (or someone else) still lose everything? Signed: Uncertain About My Future

Dear Uncertain: You are correct that if you pass away before collecting your earned Social Security benefits you won’t personally get anything. Social Security has, since inception, been a “pay as you go” program where those currently working and contributing to Social Security pay benefits for those currently receiving Social Security. That means that if you die before collecting, the monies you contributed will have already been used to pay other recipients, but the contributions you made may still entitle your dependents to benefits on your record. For those who are in their early 60s, average longevity is mid-80s, meaning your spouse would likely collect benefits on your record for more than two decades, any minor children could collect until they are adults, and any permanently disabled child you may have would get benefits from your record for the rest of their life as well.

The Social Security payroll taxes you contributed were not put into a private account in your name. And, on average, it is to the beneficiary’s advantage the program doesn’t work that way because that personal account would be depleted fairly quickly after you claim – rather than getting benefits for the rest of your life, you’d only get benefits (plus interest) from your personal account, which would run dry pretty fast. FYI, we have researched this very carefully and found that, on average, all payroll taxes contributed to Social Security by an individual will be recovered within about 5 years of starting benefits. The actual length of time to recoup one’s contributions varies somewhat depending on lifetime earnings and contributions made, but lower-earning beneficiaries will recover everything contributed through payroll taxes within about 3 years, while it could take as much as 5 years for higher earners to get back everything they’ve paid into the program. And for clarity, since self-employed individuals pay both the employee and employer portion of the payroll tax, it does take longer for those who own their own businesses to recoup what they’ve contributed. Nevertheless, on average, most who claim benefits will get considerably more from the program than they paid in Social Security payroll taxes.

As to your specific question, if you die before collecting, the contributions you made weren’t deposited in a personal account for you and won’t be paid out in a lump sum. Rather, the payroll taxes you paid while working were used to pay benefits to beneficiaries receiving at the time, and those working and contributing after you die will fund the benefits paid to your spouse or disabled adult child until they die, or to your minor children until they are adults. The Social Security benefits you earned aren’t just for you – your eligible dependents will also benefit from your record.

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.