Privatizing Social Security Is Actually A Really Good Idea

We’ve all heard the snickers from Liberals when anyone suggests privatizing social security. I’ve heard them so often that I assumed that, liberals, some of whom must be educated, must have already done the research and Social Security is a good deal for the people so I never really thought about it much.

After all, it has the word Social and the word Security right next to it, both of which are good things.

There’s something about receiving a check when your old from the government every month that seems like a good deal.

So, is it a good deal?

To gauge how my demographic feels about privatizing social security, have a look at these Reddit posts below: 

 

The top post ever on the topic reads:

The GOP’s big ideas for defecit reduction? Raise taxes on the middle class, cut taxes on the rich and privatize both Medicare and Social Security. Basically: Fuck you, America.

So privatizing social security means Fuck You, America?

Let’s have a look, but before I get to my facts (warning: math below)  here are some cool facts from the Social Security Administration’s Website:

 

Employee/Employer

  • The Social Security tax rate for employees is 4.2 percent through the end of the year
  • The Social Security tax rate for employers is 6.2 percent
  • The Medicare tax rate is 1.45 percent for employees and employers

 Total SSI and Medicare Tax rate is 11.85% 

 

Self-Employment

  • The Social Security tax rate for self-employed is 10.4 percent through the end of the year. The Medicare tax rate is 2.9 percent for self-employed.

The self employed are given a 1.45% break on their SS, but a hike on their Medicare bringing the total to 13.3%. You know the government has some brilliant actuaries studying this shit to get the maximum profit, something we often associate with (scary music) THE PRIVATE SECTOR. 

 

Some more stuff from their website

 The maximum benefit depends on the age a worker chooses to retire.  For example, for a worker retiring at age 66 in 2012, the amount is $2,513.  This figure is based on earnings at the maximum taxable amount for every year after age 21.

 

What this means is that if at the age of 21 you make at least $110,000 per year and earn this amount, year after year without leave until you are 66 years old— a total of 45 years , you will be paid $2,513 per month for the rest of your life. Quite a career by most standards. You and your employer will have paid in $586,575 during this same time period, of which you personally contributed $279,675 .

So how much of this do you stand to get back? Interesting question.

Here are some facts: 

 

  • The average life expectancy in the United States is 78.2 years.
  • If you lived 12.2 years after your retirement at $110,000+ per year (your retirement age after a stellar career to the average life expectancy age– another feat that few in my family have achieved) then you live 146.4 months on the social security “gravy train”.
  • In your 146.4 months you will receive $367,903 in benefits . Wait a second, isn’t that $218,672 less than you and your employer(s) paid in? Yes, it is.
  • In 2012 i’ve made 16% return on my 401k investment. This is not typical, but I reallocate my investments often based on news and recent performance of the funds available to me. I have no education in finance.
  • Let’s say the average person earns 4% per year on their 401k, if they allocate it wisely, which everyone should. What would their investment look like at 66 years of age at an average rate of 4% compounded annually? Hold on to your hat:

 

$1,055,835

 

Or, $7,211 per month on the Privatized Social Security monster, which of course is a fuck you to all Americans, as we learned earlier. I’d imagine most senior citizens could use those extra 5,000 fuck you’s per month.

 

Have a look at this report (which would get any MBA, technical writer or web designer fired) to see the income and disbursements for the Social Security “Trust Fund”, please do notice that the operating costs are never explicitly stated, nor are they easily findable with a google search:

OASI DI HI SMI
Assets (end of 2010) $2,429.0 $179.9 $271.9 $72.1
Income during 2011 698.8 106.3 228.9 301.0
Outgo during 2011 603.8 132.3 256.7 292.5
    Net increase in assets 95.0 -26.1 -27.7 8.6
Assets (end of 2011) 2,524.1 153.9 244.2 80.7

 

What this means is that the government is only netting 15.7%, after operating costs on a scheme with a gross profit margin of 46%! And yet you always hear about the government dipping into the social security fund. Even at 15% gross profit on a 46% margin it’s the best thing they’ve got going. 

 

Here are a few easy solutions, which I understand is a Fuck You to America and illiberal:

  • Those who bought into the scam fully (any investment with a planned return of  minus 54% would be labeled a scam, certainly) will receive their benefits, or a choice of a lump sum of the amount they paid in.
  • Those who are partially invested would be offered a transfer to a retirement account of their choosing, in full or at a rate of 75-80% (I’d take 50%)
Well wait a second!
How much will this Privatized Social Security cost me?

Nothing.

The commissions and operating costs are paid by the fund, for the privilege of investing your money and trying to bring you a return so that you continue to invest with them instead of choosing one of the other 1,000 funds available to invest in.

Can you see why Republicans, Democrats and the Statists (but I repeat myself)  don’t want social security to be privatized? It’s the best, most loved scam going.

 

(Above, A Poor Looking Senior Citizen, According To Getty Images)

(Above, A Poor Looking Senior Citizen, According To Getty Images)

 

 

You have to ask yourself, does Social Security and Medicare help poor senior citizens, or did it create them?

 

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10 Comments

on “Privatizing Social Security Is Actually A Really Good Idea
10 Comments on “Privatizing Social Security Is Actually A Really Good Idea
  1. Pingback: About Social Security | Andy Fox

  2. Pingback: Privatizing Social Security Is Actually A Really Good Idea

  3. Your demographic is Reddit?
    I’m sorry. So very sorry.

    BTW: You ought to add to the math the counter that the leftists always throw out. What would happen to the oldsters had they retired in 2008 when the bottom dropped out? Assuming of course that you logically would be fully invested in high risk equities the year before retirement. Sounds like you would still come out ahead of that pitiful return from SS.

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  4. @JohnFX, no it’s really not Reddit, was just trying to share the barometer of a place where such issues are discussed without the platform itself being slanted in name or purpose, even though Reddit is ridiculously young and liberal.

    I think there’s been enough dirt flung onto Privatizing Social Security that most people just think the educated answer is to say it’s a bad idea and it wouldn’t work. I have proven with very simple math that not only would it work, I want it right now and it shows that a giant government bureau isn’t necessary for saving money for retirement.

    I’d really like someone to come along and tell me why privatizing it is such a bad idea without using hyperbole or financial scams that have nothing to do with the type of bonds and funds that retirement funds generally invest in.

  5. I don’t think you can compare social security and 401k. What we pay in ss benifits are paid immediatly to people who are on SS. It is not invested and then given back to me like a 401k. Thus you cannot compare the returns because they are not the same type of vehicles.

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    • No you cannot compare them at all, because a 401k is a savings plan and social security is a ponzi scheme scam from what youve just described:

      pay out the early investors with the new investors money knowing one day the scheme will crash.

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  6. Math error at beginning:

    4.2 + 6.2 + 1.45 + 1.45 = 13.3
    10.4 + 2.9 = 13.3

    Self employed is the same rate, they just are paying the employer part as well.

    Also, you have only considered one case, the top earner for all 45 years, where this argument is true. For lesser earners the maths show the “social security” that occurs. The 100k*45yr worker is secure anyhow and yes their money is taken and given to the less fortunate.

    Finally, your example leaves you broke at 78 yrs. SS will keep paying till your 90 (the break even point) or 110 when you will be way ahead. The wealthier are more likely to be able to live this long, btw.

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  7. The analysis is cherry picking an ideal person to make SS look bad. SS benefits are progressive-you are paid more the poorer you are. Conversely, you get a better deal if you’re poorer.

    Let’s rerun those numbers for someone making $30,000/year with a stay-at-spouse: $1,971 (counting spousal benefits) that are **COLA’ed**

    This poorer person, paid something in the neighborhood of 35 years * 12.4% (ignoring current tax reductions) * $30,000 average salary = $130,200

    Using your assumption of 12 years of pay (it’d be longer for married folks, but let’s keep it apple-to-apples)the life time pay out is $283,824

    That’s looking better then your hypothetical case and this person took **no risk**, unlike the stock market. SS is COLA’ed, meaning they don’t take risk to keep up with inflation. The 2008-9 crash had no impact on the SS pay out. Also, SS has survivor benefits, saving old people from buying expensive life insurance.

    Conclusion: SS is a fantastic deal for poor people. They take on no risk to grantee they and their spouse won’t have to eat cat food in retirement. For rich(er) people, it’s a crappy deal.

    If you gave me a chance to opt out of SS and grantee my employer would pass the tax savings into my pay check (fat chance…even then, the extra income would be subject to income tax >:| ), I’d opt out in a heart beat. But I’m not poor. Whether you think SS is a “good” or “bad” for people depends on your concept of fair. But as it stands like most taxes, it’s a great deal for poor married people and bad for single rich people.

    P.S. As a side note, you shouldn’t include Medicare tax in the calculation. You’ve lump the Medicare on the pay side (tax), but didn’t include it in the benefit side (solely SS payments). If you want to include Medicare on the tax side, you should the cost of buying health insurance against you’re hypothetical privatized gains.

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