Social Security IS a Ponzi Scheme

I heard a commentator on Fox Business’ Freedom Watch program; which I highly recommend by the way, who said “Social Security isn’t a Ponzi Scheme because it’s not intended to defraud.” Really? It’s not? Consider this…

My parents contributed to social security and never collected from it. The reason? They both passed away before collecting benefits. So what happened to the money they contributed? It stayed in the system; which happens with almost every person who passes before collecting – the exception is disability benefits, and is not returned to the family of the contributor(s). So if I put into a system and NEVER benefit from it, haven’t I been in some way defrauded?

The simple answer is yes. If I’m not made whole at the end of the day; and in this case my family, then money has been taken from me and doled out to the benefit of someone else. If I contribute to a retirement account, monies are returned to me or my family in case of my demise, and I am or my family is made whole. In this case, government is making someone else whole at my expense. While technically the intent of Social Security was geared toward a small amount of assistance for those in need, it has been bastardized by politicians on both sides of the aisle into something which is unsustainable. It wasn’t set up as a Ponzi scheme, but that’s what it is now.

I have contributed somewhere in the neighborhood of $34000 to Social Security in my life according to the yearly statement and my benefit at retirement will be around $1100 per month. I calculate that I will contribute a total of about $55000 by the time I retire. It will take four years and two months for me to draw out what I’ve contributed. So who is paying for me after that? Someone else is, that’s who!

I have always wanted Social Security to be privatized. My neighbor scoffs at that and points to wall street and the current economic crisis and says, “Where would your money be if that happened?” Where’s my money now? It’s gone. There is no money in Social Security, but the government uses it’s printing presses to put the money in my account… which devalues the money and makes my “account” worth less. And I would be worse off if I had my money in the stock market?

If my money was in the stock market or in bonds etc. there would be a money manager who’s sole job would be to keep me from losing my money, right? If my accounts lose value, I would be free to shop around for a manager who would keep me ahead of the game. That keeps them on their toes. It would also keep the markets from fluctuating as much. There would be a vested interest in growth and enough checks and balances in place to keep the markets from the huge roller coaster ride on which it’s currently embroiled.

In reality, Ponzi type schemes are destined to fail. Originally the retirement age was set at 62 when most people only lived to be 61. That should tell you that the creators of this program, did so knowing full well that there would be people who contribute and never benefit. I would also have no  problem with Social Security if I could opt out. If I could invest my money in whatever funds I chose and keep all of it, then problem solved. I can’t though. If I could and everyone else could… Social Security would end tomorrow.