Don’t touch my Social Security and Medicare!

The AARP is hitting the airwaves HARD defending the entitlement programs, social security primarily. Their argument goes that we cannot touch social security because people paid into that system all their lives, and it’s their money.

Well, er, no. Not really. Their money went to pay workers that retired already. That extra money (the lock-box) got spent on other things. The “return” on their social security “investment” is a ponzi fiction, and a poor one at that.

For example, worker pulling $70,000 a year have paid into the system $8,750 a year. But they get a benefit (in today’s dollars) $22,242 a year. This means, of course, that you need more than two workers pulling in that $70,000 to pay for our workers social security check.

Because America only counted on the money coming from more workers. That’s where the extramoney is supposed to come from.

Consider a single man who earns the average wage throughout his career ($43,100 in 2010 dollars), works every year from age 22 to 64, and then retires at age 65 in 2010. Over his lifetime he has paid $345,000 into the system. But he is likely to get back $72,000 more than that, or $417,000 in Social Security and Medicare payouts, according to recent Urban Institute calculations. A single women with the same work and tax history will come out even further ahead due to her longer life expectancy, likely netting $464,000 in lifetime benefits, which is $192,000 more than she paid into the system. These amounts are in constant 2010 dollars and assume a 2 percent real interest rate.

It’s not a big return on (non) investment, but it’s still more money that was put in.

And it’s been this way since the beginning:

As a result, the first monthly Social Security check went out on January 31, 1940 to Ida May Fuller, a retired legal secretary from Ludlow, Vermont.

This maiden disbursement was $22.54, which, according to Social Security Online, after cost of living increases and 35 years of receipts until her death in 1975, totaled a startling $22,888.92 in payments from a system to which Mrs. Fuller contributed $24.75.

Then, baby boom. It’s just downright depressing for those of us paying into the system now:

This scheme is even more crooked than Madoff’s. But try and explain that to adults, especially Baby Boomers. The math is complicated, but the typical boomer seems to understand that he or she is on the winning side of the curve in this scheme. We will get a good return on our Social Security payments and a fantastic return on our payments into Medicare.

But try talking to kids about it. I do so regularly, often in college classes that I visit.
Whenever I am before a class, I make it a point to tell the students the truth about Social Security. And the truth is that when the current crop of college kids are in their peak earning years, each will be supporting half a retiree. “I’ll be on the beach sipping a margarita and you’ll be paying my bills,” I tell the kids.

And those bills won’t be cheap. When you look at the projected costs of Social Security and Medicare 20 years out, you see that each kid in that class will have as much as $500 a week deducted from his paycheck to support his half of a retiree.

And, it’s even worse when you add medicare into the mix.

Medicare benefits are the main reason most workers are coming out ahead. A male earning the average wage throughout his working life who retires in 2010 paid $55,000 into the Medicare trust fund, but is likely to receive $161,000 worth of Medicare benefits, the Urban Institute found.

There is simply no way $55,000 worth of lifetime payments can cover $161,000 worth of benefits. But, back to Social Security:

But it’s mainly a Ponzi scheme, an agreement to tax each generation to pay for the last one, a scheme that works pretty well until the baby boomers come along. Then the ponziness of the scheme is apparent even to people who are hardly paying attention and something has to be done. So we’re stuck. We paid for our parents and grandparents but there isn’t going to be enough coming from our children and grandchildren to pay for us.

This isn’t a tragedy. Most Americans under the age of 50 don’t expect to get very much from social security. They aren’t counting on it. So “taking it away” isn’t a big deal. Except politically, and the fact that you can’t talk about this solution just shows you how dysfunctional our political system has become.

It’s not going to be there. That money the government is “saving” for your future isn’t going to be there and the money taken out of your paycheck each week should be renamed “welfare for the elderly”.

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13 Comments on “Don’t touch my Social Security and Medicare!”

  1. Brian L. Says:

    Just like every other social welfare program invented in history, ours can only continue so long as people are having children, and lots of them. The second the population begins to contract — no matter how slightly — the entire scheme unravels.

    Just ask Japan.

  2. Car in Says:

    I did my part, Brian. I’ve got five kids.

    Of course, you have to assume that those kids are going to be productive. Not on welfare or in jail.

  3. Jay in Ames Says:

    The life expectancy was what when SS was introduced?

    “When Social Security started, age expectancy for the average man was 58. It was 62 — 62 for women.” – Glenn Beck

    I can see where that would work. Now, at 79, not so much.


  4. I saw one of those AARP commercials the other night. The actor looked into the camera, and told me he was a retired teacher, then started in on how he relies on his monthly Social Security check.

    I immeadiately launched into a string of obscenities. As a retired teacher, he likely has a pension much more generous than I’ll ever see, and if he is relying on his monthly bribe from FDR, then he has made some piss poor choices in his life that I shouldn’t be asked to pay for.

  5. Car in Says:

    They had the president of AARP on the local radio station this morning … started my day out pretty shitty. And it’s simply gotten worse.


  6. So what is the answer for the baby boomers? Many of whom are at lower income wages? If you want them to continue working – that’s fine if they have a desk job – but some are blue collar workers who might not be able to work until they are 75. And then there is the matter of age discrimination in the work place. Also, it is being written more and more that people live longer – is the answer then to let them die and hope that they do just that???? Is that the answer to the social security dilema? The fact is you can not just pull the rug out from under people like myself who have been paying into social security since the age of 16, paying for the WWII generation…….People get a little sensitivity and care about someone besides yourselves.


  7. So what is the answer for the baby boomers? Many of whom are at lower income wages? If you want them to continue working – that’s fine if they have a desk job – but some are blue collar workers who might not be able to work until they are 75. And then there is the matter of age discrimination in the work place. Also, it is being written more and more that people live longer – is the answer then to let them die and hope that they do just that???? Is that the answer to the social security dilema? The fact is you can not just pull the rug out from under people like myself who have been paying into social security since the age of 16, paying for the WWII generation…….People get a little sensitivity and care about someone besides yourselves.

  8. Car in Says:

    People no longer need to retire at 65. Many cannot, even with social security. My mom is over 65, and continues to work.

    No one has suggested pulling the rug out – NO politician has put forth a plan that does such a thing.

    But as someone under 50 – I would be a fool if I counted on it. I also don’t want my children to be forced to pay $500 a month into such a system when they’re working.

    Honestly, everyone knew this was going to happen. The maths didn’t work.

  9. beasn Says:

    I’ve got an answer. What did people do before FDR bribed* the populace with other people’s money? There certainly weren’t people tossed into the streets and left to die. Granny moved in with family and family, their church, or community took care of her as they should.
    But now, people are lazy and would prefer the evil rich/thieving gubmint, pay for granny, so long as they don’t have that responsibility.

    And now they are talking about raising the age in which to collect. Um, sorry, then it truly becomes a worse slush fund than it already is if most people die before getting anything of what they had taken from them.

    Privatize it and let family take care of family.

    *it started out voluntary – now it’s forced

  10. beasn Says:

    Also, it is being written more and more that people live longer – is the answer then to let them die and hope that they do just that????

    Don’t worry, Obamacare will take care of that for us. It will also take care of that nasty little social security problem. Kill many old birds with one stone.

  11. Lee Says:

    My husband and i paid into Social Security all our working lives. Because of poor health, neither of us can work now. We invested all our savings in what we thought was wise. But because of the stock market going bust, there isn’t a lot left And now we are told that we may not get SS or Medicare any more. So now what do we live on? And who will pay our medical bills and medicines? Our only hope is that we die before long, because we surely aren’t enjoying our retirement years. Thank you, US government!

  12. Car in Says:

    People who trusted their money to Bernie Madoff are in the same fix, Lee. Exact same situation.

  13. Car in Says:

    Except, of course, there is no one going to jail for the government backed ponzi scheme. It’s legal when the government does it.


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