Feb 8 2008
11:46 am
(Anonymous)'s picture


I have paid into SS for about 40 + years and would like to see some income from the insurance fund that I have partially funded in the next few years.

It is not a free giveaway. Many of us have had payroll deductions for many years going into the SS fund. It is an insurance program.

(Anonymous)'s picture

People don't need to work, Social Security will take care of the

Why do people think they can survive on Social Security alone, with no job to add to their income to pay bills? Need info for a thesis, thanks Sandi

(Anonymous)'s picture

Social security

Sandi,nobody has ever said they will rely on social security to pay all there debts,they use it to shore up there retirement savings.

redmondkr's picture

Apparently Social Security

Apparently Social Security is considered a very good investment in some circles.

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R. Neal's picture

That's outrageous. I'm going

That's outrageous. I'm going to post about it at Facing South. They're big on predatory lending....

RayCapps's picture

Yet another bipartisan commissionon SS?

We seem to be averaging at least one a decade since the 1980's. The hard truth is, Social Security isn't likely to see meaningful reform of any sort. Privatization and/or means testing are the elephants in the room that no one is going to be able to garner enough support to implement. Warren Buffett is right that the projected SS deficit isn't going to bankrupt the United States. Short of that, I just don't think we'll ever really reform the prgram.

My take on the initial question was whether or not there was a better way to utilize those FICA funds for the purposes they were originally intended. I think there is. If Social Security was a market fund, a government bond, or even a savings account, no one in their right mind would put their money in it. The rate of return is pitiful and projected to go negative for post boomers.

How poor an investment is it, really? Well, you could take what you need from FICA to provide disability and survivor benefits, use a part of it to boost the underwriting of the FDIC from $100,000 to $1,000,000 per, and mandate that everyone transfer the rest of it into a savings account at a FDIC insured banking institution. The rate of return of just doing that would be significantly better than what is offered today, and there still wouldn't be any risk to the individual investor. It's just a lousy way to "save" for retirement.

However, it's also a very emotionally charged issue, and money and emotion are very unhappy bedfellows as a rule. Consequently, no reform of how FICA dollars are utilized is forthcoming. We're just wasting pixels suggesting otherwise.

R. Neal's picture

One problem is that people

One problem is that people keep looking at it as an investment when it's really a wealth redistribution program.

(Ducking for cover.)

RayCapps's picture

I'm cool with that:

Only it doesn't seem any more effective at redistributing wealth than at providing a return on its investment.

Wouldn't a sensible wealth redistrubtion program focus on taking money from those who make the most and giving it to those who make the least?

Instead, Social Security:

1. Taxes wages earned by laborers but leaves untouched investment income (where the REALLY wealthy folks get most of their money)
2. Caps those wages subject to the tax, thus permitting those earning the highest wages to pay proportionately less than those making the lowest (isn't that regressive taxation?)
3. Redistributes the funds collected by FICA to recipients based on age and - perversely for a redistribution program - how much the recipient paid in FICA taxes over his/her lifetime.
4. The recipient has no cap on investment income nor does it consider net wealth in paying out the benefits.
5. However, should someone need to come out of retirement and resume working as a laborer to make ends meet, the benefit can be reduced (and the recipient gets the joy of contributing back to FICA all over again just for grins).

If it gets a D- as an investment, it would have to get an F as a wealth restribution program.

CBT's picture

"unless your candidate is 1.

"unless your candidate is 1. going to raise taxes substantially or 2. make huge cuts in government spending."

I should clarify, no candidate will tell you this is what they are going to do. There may be some general references to spending cuts, but little particulars. Some candidates' plans will raise taxes, but not tied to SS.

R. Neal's picture

Obama says he supports

Obama says he supports removing the cap on income for payroll deductions. Clinton had said previously that she wants a balanced budget before she will talk about any changes to Social Security but proposes to form a bipartisan commission to study how to keep it funded.

CBT's picture

In a couple of posts there

In a couple of posts there seems to be a confusion between SS retirement benefits and SS disability. Those are two distinct programs. It's the retirement that's the primary issue.

With the number of those set to retire starting about now, the so-called babyboomers, there is not enough money in the SS program to pay those benefits. In 1950, there were 16 workers supporting one retiree. Today, that number is about 3. In a few years it will be 2.

Not electing "Bush's" won't solve the problem, unless your candidate is 1. going to raise taxes substantially or 2. make huge cuts in government spending. And, even with those it would only prolong the end, not solve the problem. Given no candidate currently running will do 1 or 2, we need to find a viable solution.

As previously pointed out, SS is a bad investment. It's worse for the poor who do not have the choice to make other investments. The wealthy don't depend on SS. The poor do. Doesn't it make sense to give those people options to get a fair return on the money the government is taking in SS taxes?

Some interesting information from the SS Board of Governors here:


Paul Witt's picture

With the number of those set

With the number of those set to retire starting about now, the so-called babyboomers, there is not enough money in the SS program to pay those benefits. In 1950, there were 16 workers supporting one retiree. Today, that number is about 3. In a few years it will be 2.

There might not be enough cash but there are billions in US Treasury certificates. Unless you think those aren't a strong debt instrument.

Paul Witt's picture

Finally WhitesCreek states

Finally WhitesCreek states the obvious. Social Security is just fine the way it is and has been taking in more money than is paid out for about 20 years now.

As long as we stop electing Bushs our economy should be more than strong enough to push through the baby-boomer retirement pinch.

WhitesCreek's picture

Try this quote:

DOBBS: Are you surprised when you focus on the two deficits we just talked about, the trade deficit, and the budget deficit? The budget deficit is 3.6 percent of our GDP. The trade deficit is reaching just almost 6 percent of GDP. And the president is talking about reforming Social Security. Does that surprise you?

BUFFETT: Well, it's an interesting idea that a deficit of $100 billion a year, something, 20 years out, seems to terrify the administration. But the $400 plus billion dollars deficit currently does nothing but draw yawns. I mean the idea that this terrible specter room looms over us 20 years out which is a small fraction of the deficit we happily run now seems kind of interesting to me.

That was in 2005. The numbers are even scarier now.

And...Remember to fact check anything a Republican says.

WhitesCreek's picture

May I remind...

It's an insurance policy against disability. It's actually not even social security..It's the "Old Age Deposit Insurance Program" and I am personally a testament to its value to Americans and America.

My father died when I was 11. Mom survived on the $500 a month check while she took office classes and found a job. We didn't eat very well or have new clothes all the time, but we got by. Mom eventually worked her way up to Deputy Director in the Georgia Secretary of State's office working for Max Cleland. Between the two of us we have repaid the insurance system many times over, though Mom has passed on, and I'm still paying...Happily!

And anyway...There is no $10 trillion unfunded mandate and Social Security is not bankrupt. There's is a calculated deficit in 20 years, and that's all.

(Anonymous)'s picture

Thank you, Whites Creek!

I absolutely agree. Social Security is sound, is not going to be in ANY danger of 'going broke' until about 2034 WITH the current rate of employment. It is NOT an entitlement program as scorned by the millionaires in Congress. Those of us who receive SS benefits PAID for it every week we worked toward retirement. We should NEVER even consider allowing our SS Trust Fund to be turned over to Wall Street crooks. Look at how many pension plans and individual retirement funds have been Stolen by the likes of Abramoff or Goldman Sachs (a private company, I just learned, that is reaping profits on our FOOD STAMPS funding).
Basically Social Security was created to protect American workers so they would earn a retirement pension. Before the TEAs and GOPs in Congress dare try to change Social Security and/or Medicare, I say they should cut their OWN life time benefits before they dare cut our meager benefits WE HAVE EARNED. And btw, Max Cleland is my personal hero!

Pam Strickland's picture

I benefited too

My parents died 49 years ago this coming Wednesday. I was 14 months old. I got survivor's benefits until I was 21 (or was it 22?). It meant I didn't have to work (as much) through high school and college and made a huge difference in my life.

Pam Strickland

"We are what we pretend to be, so we must be careful about what we pretend to be." ~Kurt Vonnegut

Bill Woessner's picture

Social Security as Insurance

There are thousands of stories out there like yours. Millions, maybe. And every single one of them neglects opportunity cost. Don't you think your father paid for that insurance? In fact, he paid quite dearly for it. You said your mom got $500 per month? That's worth about $150K upfront. It's nothing to sneeze at but it's also not a whole lot. Just think about how much better off your family would have been if your father had bought a sizable term life insurance policy. Too expensive, you think? I'm overweight and I pay just about 2% of my salary for a 20-year policy worth 20 times my salary.

Again, it goes back to relinquishing control. You're happy that Social Security saved your family and that's completely understandable. But the truth is that it was crappy insurance and your father paid through the nose for it. I don't want to be in the same situation. I don't trust the government to make the best possible choices for me and my family. I'd rather spend my money on enough life insurance to provide for my family AND get it at competitive rates. And that's something Social Security just doesn't do.

Carole Borges's picture

Oh, no not the insurance companies!

Just look at any city to see what is in those tall glass towers sitting on large chunks of expensive downtown land, just check out the salaries of those insurance CEOs. Insurance companies count on poor people not being able to pay their premiums.

Bill Woessner's picture

If you're insinuating that I

If you're insinuating that I sell life insurance, you couldn't be further from the truth. I'm a mathematician. And despite the fact that I'm an industrial mathematician, I still know a thing or two about logic. So if you're going to go around taking pot shots at my logic, please be prepared to actually employ some of your own instead of your unsubstantial one-liners.

Bill Woessner's picture

Wrong argument

I'm the first to admit that I don't possess the world's greatest writing skills. So let me repeat argument out for you in a more concise format:

Premise 1: Government should regulate personal responsibility.
Premise 2: Ho Ho consumption requires personal responsibility.
Conclusion: Government should regulate Ho Ho consumption.

So if you accept that the government should regulate Ho Ho consumption, there's no contradiction. However, I don't think most people want the government regulating their Ho Ho consumption. So one of my premises must be wrong. I guess you could argue that it's the 2nd premise. But, given the rise of obesity in the United States, I'm leaning toward the 1st premise.

SammySkull's picture


My conclusion, government should stop subsidizing corn to the point where corn syrup is so cheap that we find it popping up in more and more products making less healthy choices cheaper and/or making what should be healthy choices less healthy so that, in the end, poorer people find themselves able to by enough crappy food instead of very little healthy food.

When a can holding three whole peaches swimming in a corn syrup mixture is cheaper than one whole fresh peach, the family on the edge finds themselves eating the canned peaches which are less healthy both because of the corn syrup as well as the lack of vitamins which are leached out by the canning process.

Then when we aren't paying people to produce a less healthy alternative we can have that much more money to divert elsewhere, such as to social security as well as education enabling people to understand how to make better, healthier and better informed decisions in general. Then we won't have to blame poor people for eating Ho Hos when all they really wanted was to use their meager resources to stop being hungry the best they are able.

RayCapps's picture

Uh, since we're nit-picking logic and accuracy here:

Canned foods aren't less expensive than fresh foods because of subsidies. An ear of corn received the same subsidy whether it was left in the husk or put into a can. Canned foods are less expensive because they have very long shelf lives that facilitate mass production and economies of scale. Additionally, putting sugar and/or salt into a canned product does not measurably enhance the shelf life of a canned good. The cooking process sterilizes the sealed can and its contents. Provided the seal of the can is not compromised, shelf life is indefinite in terms of food safety. Of course, flavor degrades significantly over time, thus most canned goods have an advertised shelf life of 2-3 years.

The decision to pack your peaches in sugar or your corn in saltwater is a market preference exhibited by the consumer's buying habits. From a manufacturing standpoint, no matter how heavily subsidized corn syrup and/or salt may be, they are still more expensive than plain water. They are present only becasue, in the interest of making that evil profit, companies sometimes give consumers what they want rather than what they probably ought to have. It seems the lower sales of low sodium and no sugar added canned goods have proven a deterrent from going entirely in that direction.

I return you to your regularly scheduled defense of the status quo.

Pam Strickland's picture

Amen, Brother Pam

Amen, Brother

Pam Strickland

"We are what we pretend to be, so we must be careful about what we pretend to be." ~Kurt Vonnegut

WhitesCreek's picture


So far you haven't backed up a thing you've said, in spite of some wild numbers. Let's see the math on $500 a month being worth $150k up front. You are missing way too many variables to make a valid estimate.

The ODIP is a pooled risk program of the highest success. Part of what I paid in went to my grandmother, my aunts, and the crippled guy who does odd job electrical work for me. Your arguments sound more like the same old privitazation drivel than anything you've thought out.

I'm glad Warren Buffett agrees with me. ;)

Bill Woessner's picture

$500 / month = $150K now

I've assumed the Rule of 25. It's a pretty common rule in the financial planning realm. It's not a hard and fast rule; it's a rule of thumb. It says that, in order to generate $1 in interest annually (adjusting for inflation), you need $25 invested. Basically, it says that you can get a 4% real rate of return from a conservative blend of stocks and bonds. Or, if you prefer, you could compare that to annuity rates but it'll be pretty close.

I willingly admit that my argument is essentially privatization. Except that I believe we need a true anti-poverty program, instead. I'm not kidding when I say we could completely end poverty in the United States for less than we spend on Social Security. How? Well, in 2005, there would have been 55 million Americans living in poverty without government assistance. Give each of them $10K. Total cost? $550B. Total cost of Social Security in 2005: $564B. And that doesn't include the patchwork of other social programs whose efficacy is seriously questionable.

R. Neal's picture

I don't agree with means

I don't agree with means testing for Social Security the way it is currently setup (and the way I have paid in to it for 40 years). I think wealthy people who pay in should get a check, even Bill Gates and Warren Buffet.

What wealthy people should be required to do, though, is pay in the same as working people. Some analysts say removing the income cap on payroll deductions would fix it.

After my benefit is locked in at the current rates based on my contributions and I start getting my checks, y'all can restructure it any way you want.

CBT's picture

Giving money to millionaires

Giving money to millionaires seems really silly to me.

Even if these millionaires paid in to the SS system and are drawing based on their contributions the same as a more modest earner? So, we just say thanks for the pay-in, but we'll just keep it and give to someone else?

And, these reformers want to change the system where my money is down the crapper as far as I am concerned.

Some 'reformers' realize the SS system as-is cannot survive. They want to figure a away from keeping what you've paid-in from 'going down the crapper'. The gov't can't meet the obligations promised to the millions of baby-boomers. The SS system will bankrupt if there are no significant changes. We must have significant reform. The sad part is you can't have a discussion without scare tactics. It's a perfect example of political fighting bleeding over into policy-making.

We used to leave a lot of politics behind after the elections and try to do some good for the people. Now, too often, it's 24-7 political sound-bites. We need leaders, not politicians.

Carole Borges's picture

Yep that's it...

I don't think a lot of millionaires or billionaires are sobbing over the loss of their social security benefits. Give them some credit at least for being caring people! I think a lot of them are perfectly willing to forego those small social security checks in order to insure the poor peons among us who worked as hard, sometimes harder, than they did could have a decent lifestyle after retirement.

I think the Social Security system could survive if only our coffers weren't being bled by this immoral war and by tax breaks for the top 1%. Anytime we think "can't" about something financial in America, we ought to sit and watch the war clock for five minutes.

It just might make a person think--Hey, yes we can!

Iraq War Cost

Bill Woessner's picture

Social Security Shortfall vs. Iraq War Cost

The cost of the Iraq War is literally a drop in the bucket compared to the overall shortfall Social Security faces. The current unfunded liability Social Security represents is $10 TRILLION. Your Iraq War Clock hasn't hit 5% of that, yet.

I think the Iraq War was a stupid idea. Actually, I opposed the invasion of Iraq BEFORE it actually happenend (you remember, back when it was polling at 70%?). But even if we could go back in time, stop the Iraq War from ever happening, and somehow divert all that money to Social Security, it wouldn't make a difference.

The problem is that Social Security is structurally unsound. It has been since its inception. Why do you think the tax rate has been increased 520%? Why do you think the Social Security base has been increased 136%? It's not because the system was well-designed to begin with, I'll tell you that much.

Carole Borges's picture

No stopping the war won't solve the whole problem

The clock if you noticed is still running and now McCain is talking about 100 years more...and then maybe even more war in the near future.

Social Security does need major fixing, but I'm horrified to think anyone would simply take away a retirement savings plan for people without having a damn good replacement. Let the fools invest in the stock market? Oh, sure. My brother-in-law has lost half his retirement income through investment. Or maybe the old sock under the bed method would work? How about a voluntary retirement account with good interest and with a penalty if you withdraw your own money early? What about those who have been raised to spend, spend, spend and worry about it later? Those people won't just fade away.

Many working people would have no clue what do with their money, so naturally BIG corporations would get involved. This craze to privatize everything is not in the best interest of the p[eople. It just helps big business.

The government is not all evil.

Corporations are corrupt and totally profit oriented.

I still think social security can be revamped, altered a bit, and retained within the model we now have.

Bill Woessner's picture

Social Security is not a

Social Security is not a retirement savings plan. A retirement savings plan would involve... saving. Social Security is a wealth redistribution program.

If you're disciplined enough to do it, there is a cheap, effective way to save for your own retirement. Starting at age 18, take 5% of your income and stick it in an S&P 500 index fund. Think that's too early to start? Fine, up it to 7.5% and you can start when you're 25. With a real return of 6.29%, an S&P 500 index fund won't make you rich. But it's a steady, relatively safe way to save for retirement.

What about the risk? What about your brother-in-law? Without knowing anything else about the situation, I would be willing to bet that he either A) actively traded or B) speculated in small-cap stocks. Yes, it's true that the S&P 500 lost nearly 50% between September 2000 and October 2002. But since then, it's grown at 12% per year (including the recent downturn). The key is to remember that investing for retirement is, by definition, a long-term investment. You're looking at a 40+ year time horizon.

As for saving Social Security, why bother? Younger workers, such as myself, are already GUARANTEED a negative rate of return from Social Security. Forget about the stock market, I could do better than that with an FDIC-insured savings account. And fixing Social Security through tax hikes or benefit cuts will only make it worse. Until you're willing to allow Congress to legislate that people start having more babies, Social Security will continue to be a losing proposition for all involved.

I'm not saying we don't need welfare. We absolutely do. As a society, have a responsibility to take care of those who are unable to take care of themselves. But Social Security is not that kind of program. With Social Security, you get what you pay for, pure and simple. And, like you said, there will always be people who will not save for their retirement, no matter what. But I think we can take care of those people without sending $23,964 per year to Warren Buffett.

Carole Borges's picture

Thanks for the added info.

I just believe people, by nature, (myself included) tend not to think as much about the future as they should. Therefore someone like my brother-in-law will undoubtedly make bad choices.

Saying he should have thought long-term in retrospect is a wise assumption, but now his money is gone. I'm just worried about how many people would end up in this same boat? From what I've seen, investing in the stock market is like gambling on horses. Most people lose.

As far as higher interest savings accounts being better than a government run program, I have the same concern. Who will really be able to follow the discipline necessary to deposit their money and keep it there?

The get-to-be-a-millionaire plan you mentioned is known by almost everyone and yet no one I've ever known has ever followed it. That's what I mean. People might be able to handle their money more wisely that a government run program, but I have serious doubts about it.

Bill Woessner's picture

Ho Hos

You're absolutely right that people tend not to think about the future. So let me ask you this: Should people be allowed to eat Ho Hos? Eating a Ho Ho may seem like a good thing to do NOW but you'll pay for it in the future. Or maybe we should set up a Ho Ho quota system, akin to Social Security. For every documented hour of exercise you have, you get to eat 12.4% of a Ho Ho. Seem reasonable?

Given the opportunity, people will make poor decisions and pay the consequences. It's a big part of how we learn. The only way to ensure that people don't make bad decisions is to remove them from the decision making process. You then have to have faith that the government is making good decisions on your behalf. Given the federal government's track record, I, for one, do not have that faith.

You may think that the Ho Ho example is silly but it's really quite apropos. You're talking about funding retirement. I'm talking about making it to retirement. If you eat too many Ho Hos, you may develop a whole host of health problems: diabetes, obesity, heart disease... Need I go on? Why doesn't the government regulate Ho Hos?

Congress can't legislate personal responsibility. But Social Security is not a good solution to that problem. It's not even a good solution to anything. In fact, Social Security has created its own problem, to the tune of a $10 trillion (despite attempts to save it by jacking up the tax rate and pushing back the retirement age). For less than we spend on Social Security, we could completely eliminate poverty in the United States. It's a shame we have to send money to Warren Buffett, instead.

Tess's picture

That is thing that chaps my

That is thing that chaps my backside.

I have looked at the amount taken out of my check for what, 35 years now? A good amount gone each paycheck.

And, these reformers want to change the system where my money is down the crapper as far as I am concerned.

That doesn't make me happy, though I will have to say I am not surprised.

redmondkr's picture

I just applied for my first

I just applied for my first SS check last month. If the younger generation is planning to do away with it, I would ask that you please consider grandfathering just a pittance for my wrinkled old backside. I promise that I will only use the system for another forty years or so and I don't require much.

Carry on.

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Bill Woessner's picture

Do Away with it Completely

Look, Social Security is not a safety net. It's not an anti-poverty program. It's not even a wealth redistribution program. It'a a defined benefit program with an absolutely abysmal rate of return. In other words, you get what you pay for. You don't pay in, you don't get anything out. Plain and simple.

Just get rid of it. Replace it with an honest-to-goodness anti-poverty program that targets ONLY THOSE WHO NEED IT. There's no reason Warren Buffett should be collecting a Social Security check. Pay for it out of general revenues so you don't have a parallel tax system (wait... that's 2 parallel tax systems, since we also have the AMT).

CBT's picture

There are not enough choices

There are not enough choices in the list. It takes a mix of changes to age, eligibilty/means and the option of diverting some to private accounts. Few politicians will talk about it. All that 'third-rail' stuff, you know.

Factchecker's picture

I don't think a tiered

I don't think a tiered experiment would be easy to implement and it's still an experiment on people's retirement money that is bound to fail for too many.

Only the very savvy and lucky investors will do well. I pump a lot into my 401(k) and my Roth, and I try to manage it as best I can. I'm totally confused most of the time and I don't have enough time to work at it--even without kids. And all my retirement accounts are doing pretty poorly. (I hate to think how much I lost in 2000!) Most of my peers say they are in a similar situation.

I think we're going to wind up with masses of broke boomers and post boomers when we/they hit retirement (and who have been mostly politically disengaged), and they will demand that the government support them. And the government will have little choice but to do just that.

Social Security should remain the safety net. Anyone with more cash can invest in plenty of other ways.

tenbuck2's picture

The bad thing about SS being

The bad thing about SS being a safety net, at least for me, is that I am forced to invest more into SS each year than my 401K. In my mind a financial safety net is a very small portion of your income or worth set aside for emergencies. I paid $4100 into social security in 2007, I paid $3100 into 401k and my company matched 50%. The fact that I'm paying more for my safety net then for my main form of retirement income really bothers me.

I am 33 years old and there is a strong possibility that I will never see any of the SS benefits at retirement, or it would be a monthly payout so small due to inflation, that if I'm lucky it might pay for my cable bill. If I were allowed to put even half of the amount I paid in SS into my 401K, I would be able to retire much more comfortably.

Understanding the system has to be maintained for current payees, and near future payees, I really think that for younger Americans, an option should be given to either divert a portion or all of the SS payments into some type of private investment fund or 401k where it can not be touched by me...or by the govt. As far as taking care of the poor and disabled. (which I'm not opposed to)...maybe we should divert some of the trillion dollars we're gonna spend in Iraq to handle that.

Bill Woessner's picture

Option? Give me a break...

I really think that for younger Americans, an option should be given to either divert a portion or all of the SS payments into some type of private investment fund

Unfortunately, this isn't politically tenable for many reasons. First and foremost, Congress isn't about to give up its power over your money. The game is all about control and Congress has NEVER been known to willingly yield control. How else will they buy your vote if they can't bribe you with your own money? Alas, such is the way of modern politics.

Secondly, if you allowed people to opt out of Social Security, the result would be an exodus the likes of which haven't been seen since Moses led the Israelites out of Egypt. A giant sucking sound would be heard around the world as younger workers rushed to remove themselves from Social Security's rolls. The system would immediately collapse, requiring a massive hike in income taxes (also politically untenable) to pay benefits to those poor souls left in the system.

But really, it all boils down to the word "option". For all their talk of open-mindedness, tolerance and diversity, liberals are decidedly NOT open to giving you options with your money. I once read a blog (and I REALLY wish I could find the link to it) where someone said something along the lines of "There's no reason at all to give people control over their own money." With sentiment like that, there's very little hope for giving people an option.

RayCapps's picture

Unsolicited Retirement Investment Advice

For retirement income like an IRA or 401(k), it really shouldn't require careful management, and day to day or month to month adjustments are prone to do more harm than good anyway. Very few specialzed funds (small cap, mid cap, international, growth, etc.) manage to exceed the S&P 500 rate of growth over time, and the longer the time frame the fewer manage to beat it. Really, you should do fine if you concentrate your money in a range of S&P indexed funds and let them sit there until you reach 60 or so. Once you start nearing retirement age, begin to shift your money into safer short term investments such as government bonds and the like.

That's why I specified only indexed funds in my suggestion above. There's never been a 20 year span where an index suffered a net loss (even including the Great Depression years). If it wasn't for huge uncertainty of the coming population shift and the additional uncertainty of such a sudden, massive surge of investment dollars on the markets, I'd feel comfortable opening up half of all FICA contributions to indexed funds. There's a huge difference between putting your money into a balanced, indexed mutual fund for 20 to 40 years and saying "I bet my all my retirement money on IdleAir to succeed."

The attraction of opening some of Social Security up for private investment is, for me, the opportunity to generate real security for our seniors, offering a return on their investment far beyond anything a government could generate through tax dollars. Over the couse of many decades, it should even become possible to "self fund" your Social Security. Right now, of course, you have today's retirees being funded by today's FICA taxes, not by the money those retirees paid into the program over the course of their working years.

mjw's picture

Wrong question

The question should be "Once social security is not being used to cover the real size of the deficit in Washington (i.e., the SS payroll tax is not in surplus), what should be done about it?" The payroll cap is definitely the place to go at that point.

Rachel's picture

I'd like to see income caps

I'd like to see income caps for payouts gradually phased in (so that folks who are now nearing retirement age and counting on S.S. will still get what they're expecting). That is, treat it like a real safety net.

I know the argument that it's "your money" but if folks who don't need it don't take it, it stays solvent much longer.

And why take it if you don't need it? Consider it taxes paid to help the less well off. Don't Democrats believe in that stuff?

Carole Borges's picture

I'm with you Rachel

Giving money to millionaires seems really silly to me. I can't imagine feeling angry if I was rich and wasn't given a social security check.

Justin's picture

Remove the payroll cap.

Remove the payroll cap.

gonzone's picture

Only Problem with that

The only problem with that is movement conservatives love to run up debt using our FICA payroll taxes, while ignoring the burden of lower income people's many additional taxes such as FICA.
The more provided, the more they'll waste without balancing the budget and thus making it impossible to reclaim those funds when we need them later. It's not like we're gonna need additional funds real soon anyway.
Let's balance the budget first and later on, if the need should arise, which may not happen with a balanced budget and a lowered deficit, then let's look at removing the cap.
Now when it comes to other taxes, like income, capital gains, estate taxes, corporate taxes. etc, that the very wealthy pay, I say let's hike the hell out of them to pay for their imposing GWB on us and we'll pay for the war and universal health care, etc.

Uhh ... or what MJW says below.

"When the going gets weird, the weird turn pro."
Hunter S. Thompson

RayCapps's picture

Couldn't vote for any of the above...

If I were somehow appointed Social Security Administration dictator for a day, I'd remove the payroll cap entirely. However, I would permit half of the contributions above the present cap to be directed toward a portfolio of indexed mutual funds if the taxpayer opts to do so.

There's enough data about the long term (20+ year) growth of the stock market's primary indexes to attract my interest. At the same time, I have enough concerns about the general economic impact of of the impending mass retirement of the boomer generation to not want to take huge risks with the system we have now.

For those reasons, I'd like to experiment with limited privitization by allowing those who can best afford to take the risk to go ahead and take it. If the long term experiment proves successful, at some point in the fairly distant future (20 or 30 years from now), I'd remove the threshold and open up the 50% private investment option to everyone. If the experiment proves to be a failure, those who will depend most on social security would have been entirely protected.

Okay, let the bashing begin!

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