Social Security Can Be Good for Your Health
How Can We Make Social Security Pay Off?
Until recently I took every opportunity to inform my students about the financial fraud of Social Security. Given demographic realities and the Ponzi-scheme nature of Social Security, those about to enter the work force will receive an anemic return on their “investment,” assuming they receive any return at all. They would be far better off, and so would the economy, if they put the amount that will be taken from them by the Social Security Administration into a real investment, such as a broad-based mutual fund.
But I’m having second thoughts about presenting only the negative side of our national retirement program to the youth of America. I’ll be eligible to begin collecting Social Security payments in a few years, so I’ve decided to take a more positive attitude. The Social Security taxes I have already paid are sunk costs, and therefore are not costs at all. Only the future taxes and income from Social Security are relevant to my return on the program, a return that is getting better all the time. What a shame to jeopardize that return by turning the taxpayers of the future against the Social Security program, which can also be there for them some day if only they consider the bright side of the financial mugging heading their way. In the hope that the young people of today can be encouraged to stay the course with their Social Security “contributions,” I am writing them an open letter telling them the rest of the story. You see, Social Security is about more noble objectives than achieving financial success.
—DRL
Dear Young People,
There simply is no better feeling in the world than sacrificing for the benefit of others. That is particularly true when your sacrifice benefits me. I want you young college students to keep that in mind the next time you hear someone criticizing the Social Security system. I will be retiring about the time you are paying large sums into Social Security, and your tax payments, I mean contributions, will be sent directly to my buddies and me so we can afford to drive enormous motor homes to the local shuffleboard courts. None of it will be invested into your own personal account for your retirement.
Some of you may be asking, but then what kind of financial return can I expect from Social Security? That is the type of question we have to expect from those who, because of the damaging effects of natural selection, insist on thinking of themselves first. But let me consider the return a college graduate about to enter the work force can expect from Social Security. The news is better than some of you believe, especially those of you who believe an invasion by the space aliens who kidnapped Elvis Presley is more likely than Social Security being solvent when you retire. Let me give you my unwritten, but completely unenforceable, guarantee: you will receive Social Security checks when you retire. That is assuming you live past age 67, which you probably will because of a wonderful incentive built into the Social Security program for your benefit. Because of this incentive, your rate of return can be far better than the experts are now predicting. Let me explain.
Assume you work from age 22 to 67 and make only the median family income during your career. In this case your Social Security contribution will be about $3,000 a year, recognizing that you will generously help your employer with his contributions to your Social Security by accepting wages lower than you would otherwise have received. These contributions will make you eligible for Social Security payments at age 67. How much will you get? The maximum you can receive (as I write this) is $23,868, which assumes that your spouse is still alive, or at least appears to be, and also 67 or older. When you are 67, 45 years from now, the payments will be higher, assuming they keep up with inflation (your Social Security contributions will also increase with inflation, but let’s ignore that minor inconvenience). Let’s be optimistic and assume they will. Assuming a 3.1 percent inflation rate (the average over the last 70 years), then your annual income from Social Security will be $91,453 at age 67. And you thought Social Security was a lousy deal.
I’m tempted to rest my case right here, except someone is probably asking, “But how better off would I be if, instead of contributing to Social Security, I put the $3,000 a year into the stock market for the next 45 years? At the risk of encouraging people to think of Social Security only in crass financial terms, I will answer this question.
Over the last 70 years the stock market (as measured by the Standard & Poor’s 500 index) has grown at an average annual rate of 10.9 percent. At that return, your $3,000 a year will be worth $3,182,779 when you are 67. With that amount of money, you could buy a lifetime annuity that pays over $356,000 a year. So a cynical, but completely accurate, conclusion is that the Social Security system will bamboozle you out of over $264,547 a year (the difference between $356,000 and $91,453) during your retirement.
But why be so negative? After 45 years of 3.1 percent annual inflation, $264,547 will be worth only about $69,000 in today’s dollars. Also, think of the incentive Social Security gives you to take good care of yourself. You can make Social Security pay if you live long enough. The present value of your Social Security income will be worth the $3,182,779 your private investment would have provided, if you simply refuse to die until you are 125 years old. (This assumes that your annual Social Security income of $91,453 grows at 3 percent a year—good luck—and you discount the future value of that income stream by 5 percent—ask your favorite finance professor why discount is necessary.)
So Social Security is right up there with conferences on global warming as a way of promoting long life. I’m certainly keeping myself in peak condition in anticipation of benefiting as long as possible from your Social Security contributions. I don’t want to go face down in my oatmeal until you young folks retire.
Sincerely,
Dwight R. Lee
Ramsey Professor of Economics
Comment by Ned Netterville on 27 October 2010:
As Ron Neff has pointed out, anyone can opt out of Social Security, at least part way out. (see: http://www.thornwalker.com/ditch/spartacus.htm) Since I’m Spartacus too, and because I don’t contribute to SS either–haven’t since 1971–I’m all the way out, and, boy, does it feel good. I’ve also opted out of Medicare, which makes me feel even better–and healthier! Having carefully observed my fellow seniors, their weekly prescription pill boxes and sundry ills, I have become convinced that those who sign up for Medicare are going to need it.
Comment by Larry L. Stuler on 27 October 2010:
The Sacred Cow – Social Security. It’s Social Security that opened the door to Socialism.
The Founding Fathers fought to set up a country based upon individual sovereignty. To accomplish this they wrote the Declaration of Independence and stated that “all men are created equal”.
The Founding Fathers fought to establish a government that would uphold individual sovereignty. To accomplish this they wrote and adopted the Constitution. The Constitution recognizes that “all men are created equal” by only granting this federal government jurisdiction over foreign commerce, interstate commerce, and trade with the Indians.
What an amazing accomplishment of the Founding Fathers – they established a federal government that has absolutely no jurisdiction over intrastate commerce because “all men are created equal”.
Then Americans went running to this government that has no nexus with the sovereign individual and asked for Social Security. Americans threw away their sovereignty and became federal employees subject to whatever whim the government decides to implement.
Which of the Founding Fathers would have gone running to a nanny government for any kind of “benefits”? NOT A SINGLE ONE OF THEM!!
You signed the “Form SS-5” and applied for a S.S.# from a government that has no connection with you because “all men are created equal”. You became a “taxpayer”. “Taxpayer” is a legal term defined at 26 CFR 2.1-1(a)(5) as a member of the Merchant Marine – a federal employee. At 26 CFR 2.1-1(b) it states that this is the definition of the term wherever used in the Code and the regulations for all calculation of taxes.
With Social Security in place we have ushered in Socialism:
1) Income tax – the second plank of the Communist
Manifesto.
2) Inheritance tax – the third plank of the Communist
Manifesto.
3) Central banks – the fifth plank of the Communist
Manifesto.
4) Government controlled education – the tenth plank of
the Communist Manifesto. This is probably the most
damaging since we’re all brainwashed all of our
lives.
We have all the “benefits” of Socialism – poverty, crime, homelessness, illiteracy, innumeracy, terrorism, and war. No one wants to touch the Sacred Cow – well its time to abolish Social Security, return everyone’s money, with interest, and restore American sovereignty.
You can’t fix Socialism by voting. No matter who is elected, the underlying superstructure remains in place. You have no rights at all as a “taxpayer”. You can’t control where the money gets spent. You can’t control who gets government “benefits”.
The Founding Fathers are turning over in their graves! Can you imaging any one of them asking the government to help them with anything at all?
See the entire Social Security Scam at LLSTULER.wordpress.com – did you ever wonder how in a country where “all men are created equal” that your neighbor could work for a federal regulatory agency and have jurisdiction over you?
Comment by Pat Fields on 27 October 2010:
The nature of its imposible math aside, the Social(ist) Security Program achieves it’s paramount goal of coaxing people from the superior protections of the ordinary, original jurisdictions of their States, into that exclusively federal, wherein Congress is totally unconstrained in its further dealings with such ‘persons’ as provided by Art. IV, Sec. 3, cl. 2.
“I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents…” –James Madison
Therefore, the grant and acceptance MUST occur within Congresses private domain.