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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (323786)	1/30/2007 7:28:32 PM
From: TimF	Respond to of 1577893

Social Security: 83% Welfare In my post earlier today, I analyzed my recent social security statement and found that the government was giving me a -0.8% (yes, that is negative) rate of return on my forced savings. You can read that post for the methodology, which I admit was simplistic (I have a day job, after all) but I still think is pretty accurate. There is not getting around the fact that the government is forcing a retirement program on you that is such a ripoff that a private company would likely get prosecuted for offering it. One of the arguments I have seen go back and forth, and that I refer to in that post, is whether Social Security is a retirement plan or a welfare program (its a floor wax and a desert topping!) One of the reasons this argument comes up so much is that its defenders take both sides of the question, depending on whom they are arguing against. If you argue that as a welfare program, Social Security is terribly inefficient and pays too many benefits to richer workers, they argue it is a retirement program with premiums and you can't cut benefits to anyone who has paid in. Argue as I did in this post that it is the worst retirement program in all of America, and its defenders say that you can't analyze it that way because there are welfare benefits embedded. So I wondered, could I solve this with numbers? I stared at my belly button for a moment, and decided that 6.5% was a good conservative private return number that I would be willing to plan my retirement around. I plugged this number into my spreadsheet (Download socialsecurity4.xls) and found that my social security premiums, invested privately, would yield an annuity at 67 of $11,699 per month, or an amount 5.89 times larger than social security is currently promising me for the same inputs. This tells me that only about 17% (1/5.89) of my taxes in social security are going to my own retirement. The other 83% are going to a huge welfare program, either directly, as payments for someone else's retirement, or indirectly, through the inherent government inefficiency you accept when you provide intellectual welfare (I define "intellectual welfare" as the government doing something for you because it doesn't trust you not to screw the task up if you did it yourself -- in this case, the task is saving for retirement). Postscript: As pointed out in my postscripts and the comments to the original post, taxes, inflation, spouse survival, etc. all complicate the analysis, but most of the effects work both ways. For example, Social Security provides some benefits to surviving spouses I don't include. That potentially understates the value of the SS package. However, as pointed out in the comments, private savings would be inheritable by my family in the case of my early death, and would dwarf SS survivor benefits in most cases. Ditto for disability benefits. Posted on January 29, 2007 at 07:42 PM \| Permalink Comments If they admit it's a welfare program, then we'll get to kill it. So they have to keep pretending it's a retirement program, despite the fact that running a retirement program that wasteful would literally be a crime if it were done by anyone but the government. As long as the largely-innumerate electorate thinks of Social Security as something that benefits everybody (including them), they keep voting for politicians who promise to keep it running. If the mass of voters ever realized what a fraud it is, Social Security would have at most 6 years left in its present form. The irony, of course, is that if we were to set up a welfare program for the elderly poor, and _not_ try to pretend it's a retirement plan for the whole country, we could probably do it in a fiscally sound way and not be careening at maximum speed toward total government insolvency as we are now. I'd happily pay to keep poor old people from starving in the streets. And I'd even more happily chuck in some extra cash voluntarily to keep my mother from ever moving in with my fiancee and I. (Don't kid yourself...at least 80% of the support for Social Security among the young comes from the "if the government checks to mom and dad stop, the wife and I will never be able to have sex again, because our parents will have to live with us and it'll be like being 14 all over again and all the work I've done to prove myself as an adult will be for nothing" factor.) But I object to being coerced under the law into paying for the retirement of people who've had the means to do their own savings. Especially when the whole point of that aspect of the program is to make the welfare component more politically palateable. Posted by: Matt \| Jan 29, 2007 9:21:01 PM coyoteblog.com

To: TimF who wrote (323786)	1/30/2007 8:42:37 PM
From: RetiredNow	Read Replies (1) \| Respond to of 1577893

Good article. Points out the plain stupidity of the current Social Security system. It's one of a few points I disagree wholeheartedly with the Democrats and back Bush 100% on. Bush tried to move to limited privatization, but the Democrats wouldn't hear of it. They are almost as stupid on Social Security as Bush is on oil. So the real question is...why do we elect such stupid leaders? Where are the larger than life leaders of yesteryear?

To: TimF who wrote (323786)	1/30/2007 9:20:53 PM
From: steve harris	Read Replies (1) \| Respond to of 1577893

It's insurance, not a retirement plan. If you don't need it, you shouldn't get anything back. Right Z? :)

To: TimF who wrote (323786)	1/30/2007 9:54:11 PM
From: Road Walker	Read Replies (2) \| Respond to of 1577893

re: My statement shows that $140,139 total taxes have been paid into the system on my behalf over the last 25 years. Most peoples statements don't show that. That's very high compared to the average. There are, and will be many more, people that depend on SS for subsistence living. And yes many are too dumb to make good investment decisions (many "smart" people on these threads are too dumb to make good investment decisions). Fact of life. Without the SS safety net, many of those people are on the street. The author also doesn't mention the folks that get disability SS benefits. If they are disabled at 20 years old and have only $5K saved, I suppose they are out of luck. In short I'm shedding crocodile tears for that poor guy that is getting less than market return on SS, while cherry picking time frames. Poor guy must have earned more than $1MM, didn't save a dime, and now he's whining about SS.