Monday, June 20, 2005

Entangled in Social Security

A few days ago I received a statement from the Social Security Administration. I love these things because they tell me exactly how much I’ve paid into SS and remind me that, thankfully, I’m making better money than I did as a grocery store bagboy back in 1991.

Over the last 14 years (8 of those as a full-time worker), I’ve paid into Social Security and Medicare $5,000 more than I’ve been able to put into my own retirement plans. So, even if you consider SS an insurance program (rather than a retirement program), my insurance payments are costing me more than what I can afford to save for my retirement. And some people are suggesting we raise Social Security taxes?

Run the numbers all you want, but speaking as a purely selfish individual, I’d rather have my money in the market with its known risks and ability to move investments to keep up with changing economic conditions than throw my money into Social Security each year and hope that by the time I retire in nearly 4 decades, the system will be able to pay me back.

This is the problem with SS statements. They paint the false impression that this is my money, that my payments guarantee me something when, in reality, the whole system could be scrapped tomorrow and I’d never see a penny. We’ve created a bit of a monster here. It’s very hard to significantly reform a program we’ve all poured lots of our own money in to. A system that, on regular intervals, reminds us of what we’ve invested and makes us feel tied to it.

Most likely we’ll end up just making some tweaks here and there to shore up the current system and move on until it closes in on another inevitable crisis. That’s a shame. We seem to be committing ourselves to a means to an end rather than just the end itself. There are certainly other ways of ensuring no senior has to live out their last years in poverty. Our current system isn’t efficient or even practical for modern realities. But we’re stuck with it because we’re so entangled in it.

3 Comments:

At 10:21 PM, Blogger Jonathan C said...

Care to elaborate on your philosophy when it comes to personal private accounts? Your logic is certainly leading you with that direction. I'd really like to hear your position.

Personally, I'd be all about personal accounts if I thought they'd be worth the $1,000,000,000,000 plus in transition costs, not to mention the current benefits gap.

 
At 9:39 AM, Blogger Alan Stewart Carl said...

Jonathan,

If private accounts could be rolled out in a fashion that would minimize transition costs, then I would support them. But I do not support government-run accounts. If it's our money we should be able to choose any kind of IRA we want. And I think there still has to be some kind of insurance to make sure no senior has to live out their last years in poverty. But at this point I can only throw my support behind the concept because there are no specific plans I've seen that I think will work.

I would also readily shelve this issue in favor of addressing healthcare first.

 
At 1:50 PM, Blogger Lokon said...

Err umm I was going to leave a well thought out and engaging comment... but really just read what Alan said. Yeah that about sums me up

 

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