This was sent to us Denise H.
Remember, not only did you contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that’s close to $220,500.
If you calculate the future value of $4,500 per year (yours & your employer’s contribution) at a simple 5% (less than what the govt. pays on the money that it borrows), after 49 years of working you’d have $892,919.98.
If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.
The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had.
Entitlement my butt, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!
Congressional benefits —- free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that’s welfare, and they have the nerve to call my social security retirement entitlements?
We’re “broke” and can’t help our own Seniors, Veterans, Orphans, Homeless! In the last months we have provided aid to Haiti , Chile , and Turkey . And now Pakistan ……the former home of bin Laden. Literally, tens of BILLIONS of DOLLARS!!!
Our retired seniors living on a ‘fixed income’ receive no aid nor do they get any breaks while our government and religious organizations pour Hundreds of Billions of $$$$$$’s and Tons of Food to Foreign Countries!
They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives and now when it’s time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? Imagine if the *GOVERNMENT* gave ‘US’ the same support they give to other countries.
Sad isn’t it?
I’ve had this discussion with many people over the years, but some people never get it. The Social Security System is NOT a Ponzi scheme. The only similarity is that older people get paid from money paid in by newer people, but beyond that, it’s all different:
1. Social Security is legal, and a Ponzi scheme is not. That may sound simplistic, but it is a big difference. Since a Ponzi scheme is illegal, the cops will eventually raid it and close it down, leaving the idiot “investors” broke and the perpetrators in jail, or at least convicted and on probation. As a former cop and fraud investigator, I know this full well.
2. A Ponzi scheme is basically fraudulent. The perpetrators convince the chumps that their money is being invested in something that earns a profit, which they will receive. Actually, it is only a pretense or minor investment to keep up the appearance while the real funds are going into their pockets. Social Security is what it is, a pay as you go transfer of money from newer to older participants. You are not told your money is being invested in stocks and bonds.
3. A Ponzi scheme will always fail because there will not be enough new members. People will realize what is going on and you run out of fools. Social Security is mandatory. It really can go on forever, as long as there are new people being born.
4. Ponzi schemes are run by crooks who are into it to enrich themselves. Social Security is run by government employees who get paid a set salary, not a percentage of how much they can swindle from the chumps. Above them are the elected politicians, who set up or change the rules. I know you think they are all incompetent, dishonest, and corrupt, and sometimes I agree. But Social Security is considered sacred by the politicians. They might be able to make some minor modifications, but they would never close it down and run off with the money. Of all the politicians in our history, only one has ever threatened to stop sending out Social Security checks. His name is Obama, and we knew he was bluffing.
Great article Denise!
You wrote the following:
“If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.”
If my calculations are correct the annuity would result in $35,716.80 per year as opposed to the $26,787.60 per year that you calculate for SS.
What do you think should be done to correct our retirement “problem” besides locking politicians out of the SS trust? Would you support reform that would allow a percentage of contributions to be invested inprivate accounts?
Chile has a remarkable record on private accounts:
http://www.cato.org/pub_display.php?pub_id=2910
http://www.ncpa.org/sub/dpd/index.php?Article_ID=1822
Imagine the incentive to work!
Imagine the opportunity for the working poor! They would have a real chance to accumulate wealth for themselves or their children should they pass away at an early age (children can inherit what remains). “Movin on up” is a whole lot better than being stuck forever in the lower classes. This would also add incentive to improve skills to afford greater investment potential and it would give every worker a real sense of being a contributing member of society!
Soaps thanks for making clear the difference between SS and a Ponzi Scheme. I think most people who refer to it as that are speaking cynically. They are worried about the future and sustainability of SS given the borrowing practices of politiicans and current demographics…but, maybe not!
As I understand it, politicians have been borrowing from SS funds for decades so in reality SS is being paid by incurring debt making the (hidden) cost to taxpayers greater than they think.
As the Boomers retire the economic pressure on workers and government will be significant.
If Wikipedia can be believed, the politicians should have anticipated this…the first recipient’s payout provided a window into the future:
http://en.wikipedia.org/wiki/Social_Security_(United_States)
Life expectancy wasn’t considered in the 1930’s when this plan was first conceived. I think the average longevity at the time was age 65 or so. Back to Wikipedia:
The WWII generation paid into SS their entire working lives, a portion of which (1/3 to !/2) was paid at a much lower rate. But they also lived much longer than expected making payouts greater than anticipated. That’s nothing compared to the way that Boomers will impact the system.
It may not be a Ponzi scheme but it certainly isn’t the best way to ensure security in our senior years. those of us that have paid dearly to support our parents should be secure in receiving SS benefits but I think a better plan for future generations should be put in place. It would be better for individuals and better for our overall economic and social systems.
Tina:
You are wrong about politicians taking money from Social Security and spending it on other things. Yes, that does happen, but it could be no other way. There is not and never can be a “lock box,” as Al-Gore once claimed. The federal government cannot put funds into a lock box. A program can run a surplus when more money is coming in through taxes than is going out in benefits, but it just gets absorbed into the general fund. SS has been running a surplus since its very beginning, and it still is doing that. Social Security’s income comes from the SS tax, not from income taxes or any other taxes, and certainly not from funds borrowed from the Chinese, which is why Obama’s claim during the debt ceiling crisis was a flat-out lie. At some point, the balance of SS taxes coming in will be equal to the payments going out. That is the top-off point, but there are many small modifications that can fix that before it happens, such as increasing the SS tax. Unfortunately, Obama has actually reduced the SS tax, also known as the payroll tax, so he can claim to be a tax cutter. All that really does is tip the balance the wrong way.
As for a voluntary private investment system, of course that would result in a bigger nest egg for the individual contributors. But you are leaving out many people. Just as there are about 50% of the population who do not pay any income taxes, there are also many who do not pay SS taxes, or very little, such as widows, orphans, disabled people, illegal aliens, and many more, yet they still collect benefits. Most of us would agree that the illegals should not collect SS, but what about all those other categories that the politicians have expanded the SS system to cover?
Soaps: “A program can run a surplus when more money is coming in through taxes than is going out in benefits, but it just gets absorbed into the general fund.”
and
“certainly not from funds borrowed from the Chinese…”
We have been deficit spending for some time and racking up debt at lightening speed. Somehow this information doesn’t quite ring true.
There is also this:
http://theweek.com/article/index/201297/is-social-security-doomed
posted on March 29, 2010, at 11:38 AM
“what about all those other categories that the politicians have expanded the SS system to cover?”
All plans that I have seen so far only transition a small percentage (2%) of deposits into a private fund per individual. It’s not ideal but it would start us down a path toward personal responsibility and private accounts.
Most widows today have accumulated their own SS and after a husbands death also qualify for a portion of his (or the other way around)
Orphans, I would hope, could be counted on tocontribute when they are old enough to work.
those qualifying under the disabled category need to be better evaluated! Too many of them retire on a disability and then go water skiing on the weekends after mountain climbing all week. My daughter is disabled and she still works and pays into the system…a much better deal for the taxpayer in general.
One way or another we are going to have to have an honest discussion about these issues. I guess I’m just willing to have it.
It’s good that we should have an honest discussion about this Tina, I support you. -Jack