The comments section of the article contains a very well reasoned rebuttal to the article from William Burrows:
Do you not see that the huge cost of 12.4% of a worker’s salary makes it difficult for most to save beyond that, but moreover that so many in the future will receive only a fraction of the earned annuity value of their contributions. The problem is that the first generations into the system received huge returns on their contributions (as politicians bought their votes) paid for by ever increasing taxes on the young so that now, an “average worker (based on wage index) will not even receive a 1 to I return on his taxes (not including disability portion). For your information, I have made a lifetime study of Social Security, and can prove my numbers and will be glad to share my computer program.
Social Security was intended in its beginnings (1935 law) to be a pension program (largely because many private pensions were failing i
n the depression), not really a social insurance program (even though it is named Old Age and Survivors insurance—OASI; the D for disability came later in 1957). This principle has been maintained throughout the next 70 years , as SS was touted as the third leg of the retirement stool after savings and private pensions.
This was why President Roosevelt insisted that its funding be separated from regular Federal taxes, so that Americans would feel a vested interest in its continuation. It was always intended (until corrupted by Congress later) that benefits reflected (if not exactly proportional to) a “fair” annuity type basis the value of contributions.
The only “welfare” built into the system at first were 1) the first dollar was worth more than the last so that low income workers would receive a greater return and 2) There was no vesting so that those who died early would pay for those who lived longer than “average”.
The social insurance part is called SSI, a means tested supplement that is paid out of general funds, NOT social security taxes. It was added in 1973.
The life expectancy at birth is irrelevant for social security. What matters is life expectancy at age 65 which in 1940 was about 13.5 years (the man/woman differential was dropped years ago). Today it is about 18.5 years. That is 5 years. From this it can be justified that retirement may have a basis to go from 67 (current age for the 1960 cohort) to 70, EXCEPT for the fact that we have paid in so much more than earlier generations.
So now the numbers:
The average worker who retired in 1950 at age 65 and lived the average lifespan of 13.5 years after retirement received 17 times the annuity value of his and his employers taxes.
In 1960 it was about 14 years, 8x.
In 1970 it was about 15 years, 4x. (NOT including medicare tax, started in 1966) for this and all below).
In 1980 it was about 16 years, 2.3x.
In 1990 it was about 17 years, 1.2x.
In 2000 it was about 18 years,.9x.
In 2010 it is estimated at 19 years,.8x.
In 2020 under current law it will be about.6x.
I can support these numbers with detailed calculations based on the long bonds into which SS supposedly “invests”.
And these are average workers. Lower income workers often received stratospheric returns, often based on as little as 6 quarters of contributions. Maximum contribution workers receive significantly less than this.
As a worker who has paid in the maximum for nearly all his working life, I will get less than 40 cents on the dollar under current law at my retirement at age 66 and 2 months in 2021.
So here is the CHAIN LETTER PONZI fraud. In order to do provide earlier generations with huge unearned returns on their social security contributions, to buy their vote at the expense of those too young (or not even born) to vote, CONGRESS kept raising the tax rates and caps so that now those at the end of the chain letter will receive NEGATIVE returns.
This is simple fraud, corruption and politics. Our own government has defrauded us. Worse, the 2.5 trillion “trust” fund is also a fraud, filled with worthless IOU’s that must be presented to Congress, which will then have to raise taxes or borrow more money to honor them. This is the fault of President Reagan who should have insisted in the 1983 changes to SS that they invest in real, marketable treasury bonds. Instead, our money has been wasted.
I and most other late baby boomers, unlike our parents and grand-parents have a legitimate claim on our money. The annuity value of what I and my employers have already paid in (up to age 57) is over 700,000 dollars. This would have bought me a terrific private pension, many times what I will get with SS. I and most of my cohorts will fight with every ounce of strength to get what we (unlike those who went before us) have earned by our payments. I will not accept any reductions for higher income workers as we already are cheated by only being credited with 10 cents on the dollar for highest earnings.