Some facts about social security that many people don't know

Really? How much is returned from social security if you die before retirement?

Prove this assertion of yours. I'm absolutely certain that you can't.

What's also missing from whatever analysis you rely upon for this mythical rate of return, is the source of the "returns." We know that SS is not invested and is now largely pay as you go. That means that the "return" is a burden placed upon the workers of today and the workers of tomorrow. I can't think of any other private retirement plan which actually pays retirees out of the salaries of workers. Government pensions do that, maybe, but I don't think the fiscal irresponsibility of various states and localities makes a good argument for social security.

 

Cato (http://www.cato.org/pubs/journal/cj14n1-4.html) shows it at about 4-11% depending on various factors such as age of contributions, size of contributions, length of life, etc. Again, it doesn't take into account the source of the returns which is *not* investment, nor does it take into account what happens if you die before you collect enough to realize such a generous return. People with private accounts who die before exhausting them are able to leave them to their children. Such accounts can realize a return on investment for multiple generations and those investments also fund economic growth. Social Security destroys wealth by redistributing it from those who are earning it today and giving it to those who are no longer productive.

 

http://www.epi.org/publication/issuebriefs_ib161-2/
^SS reutnrs are 26% higher then private alternatives.

Also here is some reading on how privatized SS accounts in Chile and UK caused the benefits to decrease by 13-20%
http://tcf.org/media-center/pdfs/pr46/12badideas.pdf

 

From the article "Social Security is a three-pronged insurance program: it insures against loss of income due to retirement, death, or disability."

Referring to Social Security as "insurance" when applied to retirement is abuse of the term "insurance." Insurance is indemnity against unexpected loss. Retirement is rarely unexpected.

Still, the only alternative provided is some privatized accounts within the social security framework. That's hardly an alternative.

 

That study compare Social Security to an estimated 1.5% economic growth, based on a 3% economic growth over the last 75 years. While the overall economy may have only grown an average of 3%, the stock market grew by an average of 12%. Since people are likely to invest in a varying mix of both stocks and bonds, you can make a fair comparison with about 8% growth in a private account. From your article, the average rate of return for Social Security is about 2.7%, so private investment would be far more beneficial.

The article makes a big deal about life insurance and long term disability insurance. There is no reason that those programs couldn't continue without the retirement portion. Even if they don't, both are fairly inexpensive on the open market. A person in their 20s (when they would normally start paying Social Security) can get either one for roughly $25 a month - about $600 a year. Considering that the average worker pays $4,800 in Social Security, counting the employer contribution, they would still have most of their money to invest.

The article does get to the real point of Social Security. It keeps emphasizing the benefits to the poor. The fact that they benefit so much better, while the rest of Americans get far less than they would on their own, makes it clear that Social Security is being used as a redistributive welfare program and not a retirement investment.

Still, most Americans would benefit greatly from switching to their own private investments.