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I thought the idea of Social Security was an insurance program to guard against you outliving your means if you live long enough, not an I-get-paid-back cash-ou

I thought the idea of Social Security was an insurance program to guard against you outliving your means if you live long enough, not an I-get-paid-back cash-out of your payments. Aren't you having a fundamental misunderstanding about what the purpose of SS is? And not sure if you know, but the dollar figures are more like: Max pay into the program: ~$300k over your 40 year working life (if you maxed out the contribution cap, 6% tax on $167k currently) Max payout from the program: ~$600k (if you draw the maximum when you retire and luckily live a long time, ~20 years) Not "paying in $1m, and only getting $200k", by a long shot. I think it's quite in the opposite direction of how you think you're being taken for a ride.

Manuel_D 4y ago
> I thought the idea of Social Security was an insurance program to guard against you outliving your means if you live long enough, not an I-get-paid-back cash-out of your payments. Is that a fundamental misunderstanding about what the purpose of SS is? Yes, this is a fundamental misunderstanding of social security. Social security isn't insurance or an investment, it's a tax that's presented as an insurance or investment in order to make it more palatable. The social security tax rates were set with the demographics and life expectancies in mind decades ago. And now that these demographics and life expectancies have changed we'll either have to drastically increase the tax workers are paying, or drastically cut the amount that people withdraw.
- supernova87a 4y ago
  I don't know what you're disputing over. It is both a tax, and it is an insurance program.
  - jay_kyburz 4y ago
    I think if you call it insurance it assumes you are entitled to something, but you are not. A future government can decided to stop paying or reduce payments if they want to. I prefer what we have here in Australia where you are required to pay money into an account that is actually yours, with a balance that you can watch grow, and that you can withdraw as you need when you retire.
    - nazgul17 4y ago
      Is it true that you can actually withdraw it all the day you retire to buy real estate and then the government will start giving out a pension for you? This is something I was told by some Australians.
      - defrost 4y ago
        Not exactly: The Age Pension is designed to support the basic living standards of older Australians. It is paid to people who meet age and residency requirements. It is targeted through the means test to those who need it most. Pension rates are indexed to ensure they keep pace with Australian price and wage increases. https://www.dss.gov.au/seniors/benefits-payments/age-pension https://www.dss.gov.au/seniors/benefits-payments/age-pension If you only have the house you live in (that's more or less median) and no income (from additional rental properties | other investments) then you might qualify for a pension. Typically people might draw on their superannuation fund to provide a weekly income for themselves although they are free to use it for their retirement plans as they see fit.
jandrewrogers 4y ago
The Social Security tax rate is 12.4%, not 6%. The “employer contribution” exists solely as a mechanism to obfuscate how much tax is being taken out of people’s paychecks to pay for it.
- matthewdgreen 4y ago
  This was increased from ~10% to 12.4% in 1983 under the Reagan Administration. The extra funds weren't paid to beneficiaries: they were intended to build up a trust fund for future generations, but they were instead borrowed by the government for general spending, and to mask the effect of Reagan's tax cuts.
gymbeaux 4y ago
Yes that is the intention of SS. I don't know if I agree with your example figures. SS was meant to be self-funding, and lately it hasn't been. This is partially because people are living longer. Furthermore, the decline of pensions and rise of the 401(k) has enabled Americans to blow their opportunity to save for retirement, often on things like housing and college tuition (but that's another topic). I think that either SS needs to be THE retirement plan, or it's the 401(k). As someone who maxes out their 401(k) each year, I do not want to participate into SS. I don't want it taken out of my paycheck, because that money would otherwise go into my 401(k) (technically), which I have more control over (where it's invested), which I can draw from in case of hardship, and which I can access at 55 1/2 instead of 65. I do think SS is a good safety net to have, and I don't necessarily want to be disqualified from it because I "opted" for a 401(k), but realistically SS payments are so low relative to the cost of living that if I found myself living on it exclusively, I'd probably be only slightly more-comfortable than if I didn't have it. It's a shitty retirement either way. You're definitely not traveling or eating out or anything like that.

Manuel_D 4y ago

> I thought the idea of Social Security was an insurance program to guard against you outliving your means if you live long enough, not an I-get-paid-back cash-out of your payments. Is that a fundamental misunderstanding about what the purpose of SS is? Yes, this is a fundamental misunderstanding of social security. Social security isn't insurance or an investment, it's a tax that's presented as an insurance or investment in order to make it more palatable. The social security tax rates were set with the demographics and life expectancies in mind decades ago. And now that these demographics and life expectancies have changed we'll either have to drastically increase the tax workers are paying, or drastically cut the amount that people withdraw.

supernova87a 4y ago
I don't know what you're disputing over. It is both a tax, and it is an insurance program.
- jay_kyburz 4y ago
  I think if you call it insurance it assumes you are entitled to something, but you are not. A future government can decided to stop paying or reduce payments if they want to. I prefer what we have here in Australia where you are required to pay money into an account that is actually yours, with a balance that you can watch grow, and that you can withdraw as you need when you retire.
  - nazgul17 4y ago
    Is it true that you can actually withdraw it all the day you retire to buy real estate and then the government will start giving out a pension for you? This is something I was told by some Australians.
    - defrost 4y ago
      Not exactly: The Age Pension is designed to support the basic living standards of older Australians. It is paid to people who meet age and residency requirements. It is targeted through the means test to those who need it most. Pension rates are indexed to ensure they keep pace with Australian price and wage increases. https://www.dss.gov.au/seniors/benefits-payments/age-pension https://www.dss.gov.au/seniors/benefits-payments/age-pension If you only have the house you live in (that's more or less median) and no income (from additional rental properties | other investments) then you might qualify for a pension. Typically people might draw on their superannuation fund to provide a weekly income for themselves although they are free to use it for their retirement plans as they see fit.

jandrewrogers 4y ago

The Social Security tax rate is 12.4%, not 6%. The “employer contribution” exists solely as a mechanism to obfuscate how much tax is being taken out of people’s paychecks to pay for it.

matthewdgreen 4y ago
This was increased from ~10% to 12.4% in 1983 under the Reagan Administration. The extra funds weren't paid to beneficiaries: they were intended to build up a trust fund for future generations, but they were instead borrowed by the government for general spending, and to mask the effect of Reagan's tax cuts.

gymbeaux 4y ago

Yes that is the intention of SS. I don't know if I agree with your example figures. SS was meant to be self-funding, and lately it hasn't been. This is partially because people are living longer. Furthermore, the decline of pensions and rise of the 401(k) has enabled Americans to blow their opportunity to save for retirement, often on things like housing and college tuition (but that's another topic). I think that either SS needs to be THE retirement plan, or it's the 401(k). As someone who maxes out their 401(k) each year, I do not want to participate into SS. I don't want it taken out of my paycheck, because that money would otherwise go into my 401(k) (technically), which I have more control over (where it's invested), which I can draw from in case of hardship, and which I can access at 55 1/2 instead of 65. I do think SS is a good safety net to have, and I don't necessarily want to be disqualified from it because I "opted" for a 401(k), but realistically SS payments are so low relative to the cost of living that if I found myself living on it exclusively, I'd probably be only slightly more-comfortable than if I didn't have it. It's a shitty retirement either way. You're definitely not traveling or eating out or anything like that.