Curious on this topic. I do a fair bit of investing myself, and as a result I end up frustrated every two weeks when I see Social Security taxes deducted from my paycheck-- ostensibly, deducted to be used to pay for my retirement, but in reality, taken to pay for current retirees' benefits. I am frustrated for two reasons: A) The current system is a glorified pyramid scheme. It's untenable precisely because it relies on current payees to provide for current retirees. At its inception, this ratio was 16:1. By the time I retire, it will be less than 2:1, meaning that benefits will have to be cut or taxes raised (or both) to maintain the current level of compensation. So, we're likely not going to get out of it even what we pay into it. B) The rate of return on my "investment", from now until the day I draw my first benefit check, will be between 0 and 1 percent. A simple savings account would accrue more interest than that. Even under Greenspan Economics, inflation will increase between now and 2039-- meaning that the hundreds of thousands of dollars I pump into the system will be seriously devalued by the time I'm ready to reclaim them. So, even if we get what we pay into it in real dollars, their buying power will have been eroded significantly. The system is obviously highly flawed, and reform has been nearly non-existent to this point. In the spirit of that, here is my highly flawed question: Which of the following best describes your attitude towards Social Security? PS: write-in answers acceptable too. Five options was too limited so this is not a very good question.. if your position's not there let's here it. Arm too tired to type more.
I'm not sure what to think of the current system. I started paying SS last summer when I worked as an intern. I guess it would be nice to get back an equal amount 45 years from now and not just dollar for dollar. If I'm succesful enough and manage to save money for my own retirement, I don't think I would mind having paid SS because I would know that some of that money, most of it hopefully, went to take care of senior citizens who weren't so lucky and need that money to take care of them. When you pay it, it seems like your getting screwed, but if you think about the people who are getting it and why they need it, you probably won't feel so bad anymore about paying it.
Personally, I'd like to see SS go away entirely. Take 80 percent less that what they are taking now and use the remaining 20 percent to support those on fixed incomes or those who really struggle to live. I'd rather see social security as a benefit for those who are poor than a fairly worthless check for retirees. The problem with SS is that, when the act was written, the average life expectancy was 65. No one expected that people would collect social security for 10 or 15 or 20 years.
I think SS sucks. Right now they are taking money out of my pay check and I'm pretty sure that I wont even get all of it back even dollar for dollar (disregarding inflation). SS bugs me because why should I have to pay for other peoples retirements, they should save money themselves and then when they retire have there own money. I put money in to my IRA so that I can have a nice retirement and I think it should be everybody's personal responsibility to do the same. Now I know this would be hard to get rid of but what about doing something like everybody born since 1985 (under 18 right now) doesnt pay SS (sure some of us have paid some but not that much yet) and then the last generation that gets SS is those born in 1984.
I would like the opportunity to forfeit my Social Security benefits in exchange for not having to pay the taxes. I would benefit, but it would do nothing to "fix" the system. There would still be an increasing number of benefitiaries, and fewer tax dollars coming in to cover them. The end result will likely be even higher taxes, and a raised age requirement... This system was a political scam when FDR created it. It's time to pull the plug... IT'S TIME TO END SOCIAL SECURITY Why the System is Bankrupt - and How We Can Replace It by George L. O'Brien edited by Mark Valverde and James R. Elwood "If the US government were required to keep its books the way businesses are required to keep theirs, the national debt wouldn't be $5 trillion. It would be $17 trillion, an amount equal to 2½ times the nation's gross domestic product." Forbes, "The Legal Ponzi Scheme," October 9, 1995 THE LEGAL PONZI SCHEME Discussions of Social Security remind me of the joke about a man who jumps from the top of a fifty-story building and after falling half-way is asked, "How are you doing?" He answers, "Fine, so far." The issue of Social Security has long been considered the "third rail'' of politics - as on the electrified subway: "touch it and you die." But like the falling man, Social Security is not really "fine." There are many reasons for the popularity of Social Security. It is the only part of the welfare state which promises benefits to nearly every person. It is also seen to relieve adult children of the responsibility of supporting their elderly parents, and it helps the elderly poor for whom there is a great deal of sympathy. There is only one problem: the system is a fraud. In theory, Social Security is a form of "insurance." In practice, it is a "Ponzi scheme." Historian Mark Knutson, writes that in the summer of 1920, [Charles K.] Ponzi claimed he was giving investors just a portion of the 400% profit he was earning through trade in postal reply coupons. As Ponzi paid the matured notes held by early investors, word of enormous profits spread through the community, whipping greedy and credulous investors into a frenzy. Investigation later revealed that there were no coupons or profits - earlier notes were paid at maturity from the proceeds of later ones. The simplicity and grand scale of his scheme linked Ponzi's name with a particular form of fraud. This type of fraud is called a pyramid scheme. To pay off earlier "investors" in such a scheme, an ever larger number of participants must to be added. In the early 1970s, a federal law known as ERISA (Employment Retirement Income Security Act) was passed after it was found that many corporate pension plans were paying current beneficiaries directly from current contributor's funds. When income declined, the corporate pension plans were terminated - just like the late investors in Ponzi's scheme. (The whole idea that businesses should handle employee savings due to federal tax preferences helped create this problem in the first place.) Under ERISA, any employer who failed to fully fund its pension plan could be held criminally liable. Charles Ponzi went to prison. But the politicians who run Social Security are not held liable for what is normally considered criminal behavior. THE PRUSSIAN MODEL Many Americans believe that Social Security is an integral part of our free enterprise system, but it is neither American nor free enterprise. The original Social Security system was created by the Prussian/German leader Otto von Bismarck in 1883. Bismarck was looking for a way to win the support of the working people, who were unhappy with the high taxes needed to support the large German military and the high prices created by the government-protected industrial cartels. He wanted to find a way to con people into believing that they were going to get something from the state, without its actually having to deliver. He asked an actuary how long most people could be expected to live. The answer was 65 years. Bismarck then set the age of eligibility for his social security system at 65, knowing full well that most of the people would have died before they received a dime from the system. In spite of this, the system was wildly popular. The Prussian concept of Social Security was an authoritarian one - based on the false premise that people are incompetent to look after their own affairs and need a paternalistic socialist state to force them to provide for their own retirement. In the US during the 1930s, President Franklin D. Roosevelt was looking for a way to gain the support of the working people who were unhappy with the continuing Great Depression and the high taxes needed to support his New Deal programs. So the Social Security program was created in 1935 (just in time for the 1936 elections). THE SOCIAL SECURITY "TRUST FUND" MYTH Republican and Democrat politicians tell us that the money each employee "contributes" to Social Security goes into a "trust fund." The money from this fund is "invested" in federal government bonds. Upon retirement, the "reserve" made up of "contributions" and the interest on the bonds would be used to pay benefits to the retiree. From the beginning, in spite of the claims that it was an old-age insurance program, Social Security paid its benefits from current cash flow, rather than paying benefits out of interest accrued on a reserve fund as a private pension plan would do. As Social Security taxes were paid into the system, the funds were immediately doled out to beneficiaries. As more taxpayers retired, they would be paid from the money taken from younger taxpayers - just like Ponzi's investors. There are other structural flaws with this system. First of all, people began to live longer. Whereas in 1883 most people died by the age of 65, by the late 20th Century people were living an average of a decade longer. This meant a huge increase in potential beneficiaries. When the Social Security program began in 1935, there were 16 contributors for every retiree, but a decline in the birth rate paralleling the increase in longevity has dropped the ratio of workers to retirees to only 3 to 1 in the 1990s. But that is only the tip of the iceberg. Once the Baby Boomers (born 1946-1964) start retiring, the ratio will shrink even more. Estimates are that there will be only two workers for every retiree by the year 2025. Social Security taxes alone will have to exceed 22% of each worker's income by that point. (Plus a compulsory matching amount paid by employers.) PRESERVE THE SYSTEM: RUIN THE PEOPLE Typical proposals to "reform" Social Security have been built around increasing taxes. The 1983 Social Security tax increase was supposed to create a reserve fund of $10 trillion by the year 2030. However, since 1967 Congress has been raiding up to $70 billion each year from the Social Security fund to hide part of their massive deficit spending. Thus the Social Security trust fund is filled with IOUs in the form of Treasury Bonds. The interest on these bonds must be paid by you, the taxpayer. The typical alternative "reform" is to renounce promised benefits by implementing a series of major benefits cuts and raising the age of eligibility. Many people have come to expect this solution. Indeed, one public opinion poll found only 8% of Americans under age 30 believe they will get anything out Social Security. Even defenders of the status quo admit that benefits will have to be reduced. Recently, proposals have emerged in Congress to partially "privatize" Social Security. But with rare exceptions, none of these proposals address the problems of the $12 trillion in unfunded liability or the high risks involved in transferring control of one's retirement savings into the hands of politicians. The promises made by politicians are simply a fraud. Few people will ever get what they've been promised from Social Security. THE CHILEAN MODEL In the mid-1980s, Chile had an even worse problem than the US. Yet according to Rita Koslka in her article "A Better Way to Do It," published in the October 28, 1991 issue of Forbes: Replacing the old system, then Minister of Labor José Piñera put in a plan that requires each of the country's 4.8 million workers to put 10% of his pre-tax income into a private pension fund of his own choosing; there are no employer contributions. There are 13 plans to choose from, and workers can switch their funds between plans to get the best returns at the lowest cost. In Chile, at age 65 for a man (60 for a woman) the worker takes the accumulated savings and either buys an annuity or organizes an individual payout schedule. He can retire earlier if he has enough money in his pension fund. To protect worker's savings, most funds are invested in securities automatically indexed for inflation. The benefits to the individual worker of this policy have far exceeded expectations. The original plans for the Chilean program anticipated an annual return of about 5.5%. A retiree with 40 years in the fund at that rate, would receive 70% of the average of the last five years of his or her salary. With a return of 6.5% the payout would be 100% of that rate. It turns out that the average rate of return has actually been in the neighborhood of 13%, which has induced many workers to contribute far more than the required minimum amounts. This has not only made it possible for people to retire in comfort, but has provided funds for a major economic expansion. Because the money that goes into these private pension funds is invested in production, a great supply of investment capital was made available to businesses and entrepreneurs at relatively low interest rates. With capital available, production increased many-fold and a huge new labor market has been created. There was also a major stock market boom (helped by new funds and new freer market policies). These private funds now constitute the equivalent of one third of Chile's gross national product. In 1992 alone, Chile's economy, measured by its Gross Domestic Product, grew by 9.7%. That is nearly 4 times the rate of growth in the US for that same year. Inflation and unemployment in Chile have been declining steadily and rapidly during the same time period. In fact, so much investment capital is now available that Chilean investors have been able to invest in neighboring countries. The program has in fact proved so successful that Argentina has adopted a similar system. Delegations from Mexico, Venezuela and Poland have visited Chile to study how this approach can be used in their countries. According to Augusto Iglesias, chief economist for the Chilean pension fund, Habitat, the Chilean Social Security system "is based on very simple and reasonable principles: that people care about their money, and that putting it in private hands is more efficient than with the government." The Chilean program goes beyond replacing a government pension system with a private system. It also eliminates the domination of retirement programs by corporate pension plans, since workers now control their own funds. Chilean Minister of Labor José Piñera summed it up by saying, "It is a common-sense system that is more easily understood by the average Chilean mother than by social security experts.'' However, the Chilean system is not perfect. The program is compulsory and there are limitations on investment choices. ENDING SOCIAL SECURITY At some point people must realize the futility of trying to save the current bankrupt Social Security system. More tinkering with the status quo won't help - Social Security is both financially and morally bankrupt - and soon this Ponzi scheme will collapse. Completely ending Social Security and returning total control over retirement savings to individual workers will end the fraud and provide opportunities for them to earn a decent rate of return on their own hard-earned money. Moreover, it will protect their savings from rapacious politicians and ensure that their money is used productively rather than to disguise federal deficits. Reforms in places such as Chile suggest that the overall benefits to the economy could be substantial if government is removed from the equation. Unfortunately, like the falling man, it is hard for most people to realize that things are not "fine" - until they hit the pavement. The sooner we end Social Security, the better for everyone concerned.
Out of curiosity, how do you all feel about supporting those who cannot support themselves? For example, social security may not mean much to those who are able-bodied workers, but what about an invalid with no family on a fixed income? What about someone who had menial, low-wage jobs for his/her entire life and received no pension? What about someone thrust into the role of parent at a late age because their children died, went to prison, etc and they are forced to become guardian of their grandchildren/great grandchildren? Assuming we ended SS tomorrow, how do we help them? Since the vast majority (something like 80 percent) of support for the needy comes from the government rather than non-profit charities or individual donors, how do we bridge the gap for those most in need? I'm personally all for eliminating SS if there is some other option proposed to protect those who are likely to struggle without it.
Well, thanks. But, I was honestly asking the question. Personally, I would love not having to shell out money for taxes and SS. I'm just trying to figure out a way to help those in need at the same time. If we COULD rely on charity, that would be fine, but we can't. Eighty percent of support for those below the poverty line comes from the government. It is my opinion that we have a personal moral and ethical responsibility to give support to those who are needy - particluarly children, the sick, the infirm and the elderly. However, if I can save money on my tax return at the same time, even better.
the US is an I-World Others and their plight is THEIR problem in our society Jeff, I Agree. . . . While i like the idea of getting more when i retire. . . .I do not like the idea of others getting less. If SS goes away . . . how many more homeless will their be. . . Rocket River
Ending the Social Security system doesn't mean ending all social welfare. Indeed, it is (to an extent) the responsibility of a society to care for those who are truly deserving. I know Social Security has been expanded (for obvious political reasons) to include many progams for these people, but is there is any reason that they couldn't be taken care of under the current welfare system? As for those who may "benefit" from a Social Security check after a lifetime of low-wage jobs; wouldn't they likely benefit from the additional money not being paid out in SS taxes every year? Wouldn't it be even better for them to be able to use or save their money on their own, rather than give it to the government with the hopes of living long enough to get back pennies on their dollars?
Not necessarily. The "entitlements" program which includes things like social welfare, aid to dependant mothers, food stamps, etc, is part of the social security system (about 6 percent). Nearly 30 percent is retirement benefits for government workers. That leaves almost 60 percent to go to SS benefits. Assuming we all stopped contributing to SS, where does the money for social welfare come from? Since welfare reform was signed in 1996, the number of people on welfare has decreased by 50 percent, however, the number of people signing up for other government services such as food stamps, regular use of community food banks, job assistance, state-sponsored daycare, etc has jumped over 80 percent. There was a great story on PBS about the state of that very thing in Oregon, one of the richest states in America. There, the welfare rate dropped but all the other agencies saw dramatic increases and the number of homeless increased in record numbers. The problem is that the welfare-to-work program does get people to work but the vast majority of them migrate to low-income jobs with no benefits and pay that cannot support them and their families. Many of them lost their supplemental welfare benefits (benefits paid to augment their regular income) because of the cuts in the system and they ended up on food stamps or in food bank lines or worse on the street. It sounds good in theory but it hasn't worked in practice. Maybe but that is up for debate. As it stands now, the limited amount people pay to social security wouldn't do much at all. Let's say your take home pay is $250 per week (just above the national average for those just coming off welfare). If social security was 10 percent, you'd increase your take home to $275. Social security isn't really 10 percent, but would $25 really make a difference over the potential loss of programs? Even if they did, who would help them make that savings possible? Remember that many of the people coming off welfare are from poor and un-educated families. The rate of those in those programs who are high school dropouts is significant. Most people don't understand how to save. Unless someone goes to them and does it for them, they don't even understand the concept. Secondly, there are millions who will rely on government aid as a result of health problems. MadMax pointed out the story of a bed-ridden woman who had in her care several young children recently. This is a prime example of what I'm talking about. Assuming you make $275 per week now with that new income, how do you pay for: child care health care transportation rent clothing for your kids food utilities school supplies etc That's $1100 per month for you and however many people there are in your household. Given that the average is three below the poverty level, that's $1100 for three people every month. How exactly can you support three people on $1100 per month particularly if two of them are children? The problem is that we are looking for easy answers where there are none. You cannot just cut something and expect it to not make an impact. It seems like a good way to help us save for ourselves but we don't have to live on $12,000 per year. I'm not saying the system isn't flawed. It is. Personally, I would be willing to drop 70 or 80 percent of the system if it meant that the remaining could go to fund the systems in place. That would be a 300 to 400 percent increase in the programs for people who cannot afford to survive as is and it would still give those of us who aren't struggling a big chunk of our money back to invest as we see fit.
