FROM MY EMAIL: Who died before they collected Social Security?

Here's an anti-Social Security email making the rounds that's a first (to my knowledge) that gets two essential elements right: (1) Social Security is essentially a Ponzi scheme; and (2) privatization is the better deal. Here's the email.

The only thing wrong with the Government's calculation of available social security is they forgot to figure in the people who died before they ever collected a social security check.

Where did that money go?

Remember, not only did you and I contribute to Social Security but your employer did, too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that's close to $220,500.

Read that again.

Did you see where the Government paid in one single penny? We are talking about the money you and your employer put in a Government bank to insure you and me that we would have a retirement check from the money we put in, not the Government. Now they are calling the money we put in an entitlement when we reach the age to take it back.

If you calculate the future invested value of $4,500 per year (yours & your employer's contribution) at a simple 5% interest (less than what the Government pays on the money that it borrows). After 49 years of working you'd have $892,919.98. If you took out only 3% per year, you'd receive $26,787.60 per year and it would last better than 30 years (until you're 95 if you retire at age 65) and that's with no interest paid on that final amount on deposit. If you bought an annuity and it paid 4% per year, you'd have a lifetime income of $2,976.40 per month.

The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madoff ever did.

Entitlement my foot; I paid cash for my social security insurance! Just because they borrowed the money for other government spending, doesn't make my benefits some kind of charity or handout!

Remember the benefits for members of Congress?
+ free healthcare,
+ outrageous retirement packages,
+ 67 paid holidays,
+ three weeks paid vacation,
+ unlimited paid sick days.

Now that's welfare, and they have the nerve to call my social security retirement payments entitlements?

They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives, and now, when it's time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? It was supposed to be in a locked box, not part of the general fund.

Again: where is the money that those who died before they reached retirement (and their employers share) put in?

Sad isn't it?

The author does have several errors of understanding the Social Security system, the first of which is the "What happened to those who died?" question, which is accounted for through the withholding rate. The larger error is the "it's my money" assumption, which is why Social Security can be fairly described as a Ponzi scheme. The money you (and your employer) pay into the system is not saved for your benefit; it's used to pay benefits to those who have already retired. Think of it this way: you pay for your parents, your children pay for you, their children pay for them, and so on.

Only to the extent that receipts outweigh the outlays is there any savings, and those savings, invested in U.S. Treasury bonds and repaid with taxpayer funds, are not held for any individual benefit.

Congressional 'benefits' are irrelevant to Social Security; they are only another indicator of how government is for the governors, not the governed.

The paragraph on investing (italicized above) is accurate and succinctly gives the rationale for privatizing. For a much more detailed explanation of privatization, here's an old post of mine.