Telling The Truth About Social Security

Who’s ready for some real talk on Social Security?

Here it is: you didn’t “pay in” to Social Security, there’s no deposit account with “your” money in it, and every single dime of Social Security taxes you’ve paid in your entire life went directly to someone else or was frittered away by Congress.

For many decades after the program was created, there was more money collected in Social Security taxes paid in than money spent on benefits. This was due to the demographics of the country at the time: in 1950 there were 16 workers paying Social Security taxes for every 1 recipient of benefits, whereas today there are fewer than 3 workers per beneficiary.

So obviously, all that extra money collected for decades when there were more taxes collected than benefits paid was set aside and invested, right? LOL. If only.

Instead of setting all that extra money aside and protecting it for future beneficiaries, Congress spent it. Every last penny. Every dollar that has been collected in Social Security taxes has been spent. What Congress did instead of saving money was create a massive IOU which it dishonestly called the Social Security Trust Fund. Except there’s no trust and there’s no fund. It’s just a gigantic IOU, like in Dumb and Dumber. There’s no numbered account with money in it waiting to be withdrawn.

Where does this leave us? Beginning around 2020, payroll taxes collected were no longer sufficient to pay for current Social Security benefits, so money had to printed or borrowed from elsewhere. As more and more money has to be borrowed to pay current benefits, the Social Security Trust Fund balance is reduced.

Once it reaches zero—and right now that is expected to happen within the next 10 years—the government is legally prohibited from paying out more in benefits than it collects in Social Security payroll taxes each year. And that will mean an instant cut in Social Security benefits of around 20 percent. By the year 2100, expected benefits will be just 65 percent of promised benefits.

As of today, a 75-year-old who worked for 50 years and earned the median salary will have paid close to $100,000 in Social Security payroll taxes over his life. Based on average life expectancy of another 12 years, he will collected more than $500,000 in Social Security benefits, and those payments will come not from a savings account somewhere, but from taxes paid by his children and grandchildren. But when it comes time for the people paying directly for his Social Security checks to receive their benefits, they won’t get nearly as much as he gets, because the Trust Fund will be bankrupt.

The people paying for the Social Security benefits of Baby Boomers today will pay significantly more into the system than the Boomers ever did, but will receive a fraction of the eventual payout.

Does that seem fair? In light of those facts, is it really accurate to say you “earned” that Social Security payment? Of course it isn’t. Social Security is welfare for American retirees. And it’s a welfare system that is not only a total waste of money designed to give Congress an even bigger budget to fritter away (if you invested your Social Security taxes, your lump sum at retirement would be 5x higher than your expected lifetime benefits from Social Security), it’s also deeply immoral.

Because of the current demographics in the country, Social Security takes money from workers today so it can give retirees 3-5x more than they ever paid in AND will pay out significantly less when it’s time for the people currently paying into the system to collect their own benefits.

Boomers receive 3-5x more than they paid in, while their grandchildren will receive 35 percent less than what they were promised. They originally called this the New Deal when it was created, but it’s a raw deal for everyone currently being forced to pay into it.

So let’s stop with the pretense that Social Security is anything other than a poorly designed welfare scheme for retirees.