Is Social Security Really "My Money"?

It’s a common argument among retirees, encouraged by organizations like AARP, that Social Security is my money and the government cannot be tinkering with it. It’s strange how this argument never came up years ago when the government decided to add an annual cost of living increase. Tinkering in the positive direction is fine. 

But advocates take advantage of retirees lack of perspective, critical thinking and economic understanding by pushing all kinds of myths and untruths to get them riled up enough to vote in a particular way.

Lack of perspective is evident when the announcement of the year’s cost of living adjustment is routinely met with complaints  that it is not really enough to keep up with inflation. They don’t understand that it was never in the original plan and any increase should be greeted with gratitude.

Lacking critical thinking, most don’t even make the effort to do a little simple research to find out how Social Security works. It’s clear that it’s not your money simply by the fact that when someone dies before retirement age, the SSA does not treat it like an inheritance to be divided among next of kin. No, the money was paid into Social Security and will be used for Social Security purposes.

There is also the lack of understanding about the government having “robbed” the Social Security trust fund and spent all the money on other projects. Consider this. Social Security since its beginning and up until this year has been collecting more money than it was paying out. The surplus had to be invested somewhere.

They can’t put it into a commercial bank or credit union. That would be an unfair windfall for that bank relative to its competition and would likely involve political favoritism. Investing in the stock market could not be justified, seen as “gambling with my retirement,” and equally problematic from the favoritism standpoint. Likewise corporate bonds are out of consideration.

What’s left? Government bonds. And what are government bonds used for? They are used to borrow money for the government to spend! The government has not been robbing from the “trust fund.” They have been borrowing the money with an obligation to pay it back, just as they must eventually pay back other bonds they sell to raise money when they spend more than they have. (They face that obligation now, as contributions are no longer sufficient to cover promised benefits.)

Finally, Social Security does not favor the rich. It is skewed in the opposite direction. Taking a look at the generic benefit calculator on the SSA website shows the difference. In one case, a person born in 1958, earning $50,000 per year, and planning to retire at 66 years old will receive $1460 per month (estimated). Leaving all assumptions the same and only changing the earnings to $100,000 gives an estimated monthly payment of $2276. Double the earnings and the benefit increases by only 56%.

 This is not my first tirade about Social Security (see here, here and here) and will probably not be my last. I just get very frustrated when people continue to fall for all those lies without doing a lick of work to investigate.