Is Social Security a Ponzi Scheme?

scourge99 said:

Can you cite your source for those numbers you posted?

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The $2.5 trillion surplus, however, has been borrowed over the years by the federal government and spent on other programs. In return, the Treasury Department has issued bonds to Social Security, guaranteeing repayment with interest.

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Social Security on Pace to be Drained by 2037 - CBS News

scourge99 said:

Can you cite your source for those numbers you posted?

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CBS might not cut it for you, I believe he is citing the trustees report. The 2009 report says that it will fall short of outlays in 2016 and will be able to finance 76% of annual benefits by 2037. I think more recent reports have gotten slightly worse because of the recession. I have also read similar numbers in multiple textbooks on insurance.

Harry Guerrilla said:

It's a terrible insurance program.
If SS were a private business, investors would be fleeing from the corporation because of the massive unfunded liabilities.

I don't have a problem with disability insurance, unemployment (on a state level) and SSI but SS retirement is a boondoggle.

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Social insurance programs do not need to be fully funded. This is for several reasons,

1. They operate indefinitely
2. They are compulsory
3. The government can tax and borrow

IMO, it would be almost cost prohibitive if they were as it would require substantially higher taxes.

drz-400 said:

Social insurance programs do not need to be fully funded. This is for several reasons,

1. They operate indefinitely
2. They are compulsory
3. The government can tax and borrow

IMO, it would be almost cost prohibitive if they were as it would require substantially higher taxes.

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Agreed.

It pisses me off when people attempt to redefine S.S. as a structured investment.

drz-400 said:

CBS might not cut it for you, I believe he is citing the trustees report. The 2009 report says that it will fall short of outlays in 2016 and will be able to finance 76% of annual benefits by 2037. I think more recent reports have gotten slightly worse because of the recession. I have also read similar numbers in multiple textbooks on insurance.

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1) whats the "return rate" of SS now? I.E., adjusted for inflation, if i paid X amount of dollars into the system, when will i break even once i start to receive benefits (assume i dont start taking benefits early).
2) With only 76% of those payments, how far does that move out the break even point?

scourge99 said:

Everyone past the baby boomers is ****ed

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you are being too optimistic. everyone including the baby boomers is ****ed

1) go into massive debt. maybe default
2) print money like crazy and cause inflation which will make the dollar even worth less so your SS checks won't buy much

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nations with control over their own fiat money tend to choose the second over the first. I think a strategic default (for example, tempt China into sending missiles over Taiwan again, and then announce that your soft power response (because you don't want to be a warmonger) is to refuse to pay back Chinese-held bills until they formally renounce all claim to Taiwan) might work; but you would have to already be at a balanced budget, which is impossible without severely reigning in the entitlements anyway.

3) raise taxes like crazy (and not just income taxes)

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unfortunately this won't raise the necessary money, which means that we are back at step 1.

4) cut benefits

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at this point it's not even a question of whether or not we will do this, simply a matter of how soon we will do it, and so therefore whether we are able to not cut the benefits of those currently on the system.

5) partial or total privatization of SS (why didn't we get this passed with GWB?)

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short answer: Republicans Are Cowards. You can see it today as well with the "oh you can't say that you can't say that" responses to Perry.

lpast said:

Acted irresponsibly ?

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absolutely.

so you think all the babyboomers had high paying jobs where they all could afford to do it all themselves right

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you don't need a high paying job to save for retirement - you simply need personal discipline and a sense of personal responsibility; neither of which are traits famously associated with the instant-gratification Baby Boomers. I was saving for retirement when I was an E-3 with a family. I'm willing to bet if I could do it, the vast majority of that 2/3rds of Baby Boomers could have as well. Their parents managed to do so on smaller salaries, because they were a generation that had discipline and responsibility. The boomers not only could have, it would have been easier for them than any one else in human history.

and they just said nah screw it, ill have the govt take care of me

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that is generally correct; though they probably put it more in terms of retirement being so far off and right now I really want this shiny object. Don't forget that the Boomers also took us from being a nation of net savers and investors to being a nation of indebted consumers.

and you conveniently neglect to mention baby boomers had no choices and were forced to PAY social security for 40 yrs or more

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of course I do - it's immaterial. I am forced to pay as well; so were the boomers parents. whether you have to pay the FICA tax is irrelevant to whether or not you should be saving for retirement.

you make alot of assumptions that are just WRONG, you assume that babyboomers should have ALL MADE ENOUGH Money to pay taxs, pay social security, feed their families and live and pay maximum into 401ks and save for their own medical retired

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all of them? maybe not. I'm sure you could find a few who were a missionary their entire lives, or a hunter-gatherer type in the deep appalachians. but the vast majority of them? absolutely. that two thirds of them have not is inexcusable and it is their own dang fault. You will not find your children terribly sympathetic when you insist that we have to destroy our lives to make up for the Boomers decision to work the "if it feels good do it" philosophy into their finances.

Finger wagging combined with "doom-and-gloom" conjecture add nothing to the discussion.

I tend to refer to Social Security as a slush fund, not a ponzi scheme.

pbrauer said:

But Social Security is sustainable by the mere fact it is a pay as you go system. By definition, it can never run out of money because there is a constant supply of payroll taxes. When the trust fund of approximately $2.5 trillion runs out it will still be able pay benefits of about 80%.

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Taking the "pay as you go" term literally for social security is a mistake because it overlooks the fact that people taking SS are not paying for it themselves. SS recipients are riding on the backs of the younger generations. So when SS reserves run out then somethings got to give. Either the SS recipients get ****ed or the SS recipients **** over the younger generations by making them pick up the extra tab.

So its "sustainable" in the sense that there are ways to keep it paying out (e.g., more taxes, less benefits). Its not "sustainable" in the sense that it cant continue paying the same benefits without ****ing somebody.

Gipper said:

I tend to refer to Social Security as a slush fund, not a ponzi scheme.

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If i may add:

A slush fund bounded by perpetuity.

scourge99 said:

Taking the "pay as you go" term literally for social security is a mistake because it overlooks the fact that people taking SS are not paying for it themselves. SS recipients are riding on the backs of the younger generations. So when SS reserves run out then somethings got to give. Either the SS recipients get ****ed or the SS recipients **** over the younger generations by making them pick up the extra tab.

So its "sustainable" in the sense that there are ways to keep it paying out (e.g., more taxes, less benefits). Its not "sustainable" in the sense that it cant continue paying the same benefits without ****ing somebody.

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Needs and demographics change throughout generations. The program was never designed to provide high net worth individuals a secondary stream of cash-flow during retirement.

no, it's not a Ponzi scheme...their would have to be investment to qualify as such, there is no investment in regards to SS.

and no, it's not an insurance policy either....you actually have property rights pertaining to insurance benefits, you have no such rights with SS.

on the front end, SS is simply a regressive tax... on the back end, it's an entitlement benefit.

Thrilla said:

and no, it's not an insurance policy either....you actually have property rights pertaining to insurance benefits, you have no such rights with SS.

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Nonsense. Look up "survivor benefits". You would think people would research topics they do not know about prior to making political statements. :shrug:

Goldenboy219 said:

Needs and demographics change throughout generations. The program was never designed to provide high net worth individuals a secondary stream of cash-flow during retirement.

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what net worth qualifies as "high"? What percentage of SS are these "high net worth individuals" siphoning off?

Consider that there are significantely fewer wealthy people than the middle and poor. Seems like dropping them would be a drop in the bucket (or maybe a tea cups worth).

What makes you think it was never designed for everyone? Did everyone just forget until now?

scourge99 said:

1) whats the "return rate" of SS now? I.E., adjusted for inflation, if i paid X amount of dollars into the system, when will i break even once i start to receive benefits (assume i dont start taking benefits early).
2) With only 76% of those payments, how far does that move out the break even point?

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This is a hard question to pin-point because social security is not really meant to provide a rate of return, so to speak. Social Security is meant to indemnify you against the loss of income due to old age, disability, or being the survivor of a deceased worker (if you are dependent). The main part everyone is talking about is your retirement benefit. There are several things that will affect your payment:

• The primary insurance amount, aka your monthly payment, is based on your average indexed monthly earnings. Basically SS takes the average of your earnings applies a progressive index that is calculated by actuaries each year to reflect the change in wages in the country. If you have a low income, more of your earnings will be replaced than if you have a high income. They say it is about 56% of earnings for low income workers, and about 28% for high income. So this depends upon your income and the growth of wages.
• Also, the amount you get will depend upon when you start to take benefits. You can start at the early retirement age with reduced benefits and also be subject to an earnings test that can reduce your benefit, you can wait until the full retirement age to get your whole monthly benefit, or you can delay retirement to receive higher payments later.
• Also, there are automatic cost of living adjustments to take into account inflation that is linked to the CPI.
• Finally, it will also depend upon your life span as well as others life spans and ages. Remember social security is meant to protect you against a loss of income. If you die you are obviously done getting money. If you live to be 100 you will probably get a pretty good amount of money when it is all said and done. You may also have a spouse, a child, a disabled dependent, etc that can still draw after you die. So this part is extremely variable and depends upon you, your spouses, or your dependents life span/age.

Then of course their are survivors and disability benefits but those are not the main thing being talked about here which will also provide some payments if you meet the criteria. Rate of return is a poor language to use to describe this though as it is meant to indemnify you against a loss of income, not provide a profit.

scourge99 said:

what net worth qualifies as "high"? What percentage of SS are these "high net worth individuals" siphoning off?

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Semantics will not work with me....

Consider.that there are significantely fewer wealthy people than the.middle and poor. Seems like dropping them would be a drop in the bucket (or maybe a tea cups worth).

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Are you assuming the wealthy and poor senior receive the same level of disbursement?

scourge99 said:

what net worth qualifies as "high"? What percentage of SS are these "high net worth individuals" siphoning off?

Consider that there are significantely fewer wealthy people than the middle and poor. Seems like dropping them would be a drop in the bucket (or maybe a tea cups worth).

What makes you think it was never designed for everyone? Did everyone just forget until now?

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Typically social insurance is going to be concerned with adequacy rather than individual equity. Basically this means that your benefits will be "loosely" tied to your contributions, but they are more concerned with maintaining a certain standard of living for everyone. However, you are correct that we don't subject people to a means test, everyone is eligible for benefits, at varying degrees though.

Goldenboy219 said:

Semantics will not work with me....

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You gave a vague term "high income". I was asking for you to elaborate on that. It was an honest question.
Is 200k income high?
How about 750k? 1 million? 5 million? 10million?

If you are going to be overly defensive and antagonistic then dont bother responding. I'll just discuss it with other people.

Goldenboy219 said:

Are you assuming the wealthy and poor senior receive the same level of disbursement?

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No.

Goldenboy219 said:

Nonsense. Look up "survivor benefits". You would think people would research topics they do not know about prior to making political statements. :shrug:

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is that what passes an an argument?

why would I look up survivor benefits?.. are these benefits guaranteed , by contract, to be meted out to beneficiaries?, do these beneficiaries have a rights to any accrued benefits?... the answer is no, they are not.


It was designed , for a valid purpose, not to be an insurance program... a design that was upheld, and explained , in Flemming V Nestor.


In the future, I would , if i were you, withhold my assumptions about what people know and what they don't know.. many people are older and not-as -ignorant-as-you wish-them-to-be.... take this free advise and run with it as you will.

drz-400 said:

Here is the problem. You are thinking like many people do about SS as an investment. It is not. It is an insurance program. The money you pay is a premium. You will be paid if you reach retirement age. If you do not you get nothing. If you die after 1 payment, that's it. If you live to be 100 you will get more. It is essentially an aleatory contract. We can calculate with pretty good certainty the amount of people that will retire, die, etc, each year and be eligible for the program based on its current age restrictions and how much it will cost based on the current payment rules. Just like we can calculate how many houses will be destroyed for property and casualty and how much to pay based on the amount insured. Using this information we can decide how much to tax ourselves. Sadly, we have chosen not to tax enough for the program. Actually we have, but the rest of the government has not saved money. The idea of a government sponsored "saving account" always makes me laugh. Does anybody think the government is going to actually save money, spend less than it takes in? I want to know. How the hell does anyone actually think a government private "saving" account will actually work?

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But an insurance company, unlike the government, keeps some amount of liquid and invested assets (that it could liquidate) in order to cover those insured expenses.

Harry Guerrilla said:

But an insurance company, unlike the government, keeps some amount of liquid and invested assets (that it could liquidate) in order to cover those insured expenses.

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and beneficiaries have specific rights to those insurance benefits, by contract...SS recipients, present and future, don't

SS was built to be flexible, which is why it is not an insurance policy.

Congress could, this very day, cut off all benefits.... and still collect payroll taxes.... can an insurance company do the same without being liable for the benefit disbursements?... the answer is no.

Thrilla said:

and beneficiaries have specific rights to those insurance benefits, by contract...SS recipients, present and future, don't

SS was built to be flexible, which is why it is not an insurance policy.

Congress could, this very day, cut off all benefits.... and still collect payroll taxes.... can an insurance company do the same without being liable for the benefit disbursements?... the answer is no.

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Basically, you just described estoppel. Social insurance prescribes benefits by law, and and regular insurance does so by contract. One is compulsory and the other is not. If congress cut off all benefits SS would no longer exist, so that is kinda a moot point. Then all we would have is a payroll tax and no social security program.

Insurance is basically the pooling of losses that can happen by chance. Insurance transfers this risk from the insured to the insurer, and insurers agree to indemnify them for their loss. That's the distinguishing factor.

Thrilla said:

why would I look up survivor benefits?.. are these benefits guaranteed , by contract, to be meted out to beneficiaries?, do these beneficiaries have a rights to any accrued benefits?... the answer is no, they are not.

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Who is eligible for survivors benefits

• A widow or widower -- full benefits at full retirement age, or reduced benefits as early as age 60
• A disabled widow or widower -- as early as age 50
• A widow or widower at any age if he or she takes care of the deceased's child who is under age 16 or disabled, and receiving Social Security benefits
• Unmarried children under 18, or up to age 19 if they are attending high school full time. Under certain circumstances, benefits can be paid to stepchildren, grandchildren, or adopted children.
• Children at any age who were disabled before age 22 and remain disabled.
• Dependent parents age 62 or older

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source

It was designed , for a valid purpose, not to be an insurance program... a design that was upheld, and explained , in Flemming V Nestor.

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You are attempting to frame the "property right" argument around contract law. Your premise might carry validity, but it does not support your argument for the fact that the courts can (and do) allow a rejection of any guaranteed contract via chapter 11 reorganization, or chapter 7 liquidation. Does this mean that private property does not exist? Of course not.

Social insurance differs considerably from private insurance.

In the future, I would , if i were you, withhold my assumptions about what people know and what they don't know.. many people are older and not-as -ignorant-as-you wish-them-to-be.... take this free advise and run with it as you will.

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My point stands.... S.S. benefits can (and are) paid to survivors of those who have worked and paid into the system.

scourge99 said:

You gave a vague term "high income". I was asking for you to elaborate on that. It was an honest question.
Is 200k income high?
How about 750k? 1 million? 5 million? 10million?

If you are going to be overly defensive and antagonistic then dont bother responding. I'll just discuss it with other people.

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Actually, i stated "high net worth".

Goldenboy219 said:

The program was never designed to provide high net worth individuals a secondary stream of cash-flow during retirement.

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High net worth individuals (or investors) are those with non-primary-residential assets in excess of either $500,000 or $1,000,000 depending on the particular definition an institution puts forth. In most cases, it is $1,000,000.