How Social Security went from being a good thing to a Ponzi Scheme and an article on how some fixed that.
October 15, 2022
I get the whole deal of how Social Security made sense in the beginning. People didn't live long and some were growing old in poverty. We had 35 workers for everyone collecting a check. Unfortunately, the federal government always spends as much as it takes in and everything more that it can get away with, including every single penny of the so-called Trust Fund. We can still turn this around and accumulate vast wealth for American Workers.
The Wall Street Journal Study
The WSJ did an article in the mid-1990s with the premise of how an average worker entering the workforce in 1952 and if all his Social Security Taxes were invested in boring stock market index funds. This includes the portion your employer pays for you that you never see as a pay stub deduction but it's still YOUR money.
If all that money were invested, rode up every rally, and took every big loss, by the time the worker retired in the 90s he/she would have over $2,250,000 saved and invested in the economy of the United States. The interest income alone would be far greater than any Social Security Check. At a 5% return that money would yield $112,500 a year / $9,375 per month or quadruple what the government gives you back after "holding" (spending) it for decades. On top of that whatever was left over would be left for your family.
At the time I started working there were serious proposals that half the SSI tax could be invested this way. There were howls of protest... from politicians. It would severely impact the way they could spend our money. Meanwhile, Americans lived longer and the worker-retiree ratio went down so now there is no fiscal way this can keep going.
Now we have long-term evidence-based results that there are alternatives, even now.
From Forbes
How Three Texas Counties Created Personal Social Security Accounts and Prospered
Merrill Matthews
http://twitter.com/MerrillMatthews
Excerpt...
Across the country, state and local governments are facing huge unfunded liabilities for their employee pension plans. And then there’s Social Security.
But three neighboring Texas counties, which opted out of Social Security 30 years ago by creating personal retirement accounts, have avoided a fiscal train wreck while providing retirees with even more retirement income.
Galveston, Matagorda and Brazoria County employees, many of them union members, have seen their retirement savings grow every year, even during the Great Recession. If state and local governments—and Congress—are really looking for a path to long-term sustainable entitlement reform, they might start with what is referred to as the “Alternate Plan.”
Like Social Security, employees contribute 6.2 percent of their income, with the county matching the contribution (Galveston has chosen to provide a slightly larger share). Once the county makes its contribution, its financial obligation is done. So there are no long-term unfunded liabilities.
Part of the employer contribution in the Alternate Plan goes toward a term life insurance policy, which pays four times the employee’s salary tax free, up to a maximum of $215,000. That’s nearly 850 times Social Security’s death benefit.
More importantly, if a worker participating in Social Security dies before retirement, he loses his contribution (though part of that money might go to surviving children, if any, or a spouse who didn’t work and therefore didn’t establish his or her own benefits). But a worker in the Alternate Plan owns his account, so the entire account belongs to the estate.
Thanks to John F Kensil - @johnkensil - for finding the story above for me.
