Social Security is a ponzi scheme. It functions by taxing the wages of workers to provide money to retirees. In the past, this worked relatively well as the ratio of workers to beneficiaries was high. Currently in the United States it’s around 3 workers to 1 beneficiary. Soon it will be 2 to 1. Social Security relies on increasing amounts of proverbial fresh meat to function. This is hardly a new argument. What is new is the proposal for guaranteed annuities to replace Social Security.
Basically the a guaranteed annuity would take the taxes you normally pay into Social Security and invest them in a low risk, rate guaranteed retirement account. When you retire, you would receive payments based on how much you invested plus the government backed growth rate. Thus, everyone is responsible for their own retirement. And considering the recent projections of Social Security’s insolvency, this may be the time to have an adult conversation with our political leaders. We sure did not have it when Reagan bailed out Social Security.
America’s retirees have failed. Roughly 70% of all retirees in the US rely entirely upon Social Security for retirement income. While many of them likely had bad luck, 70% does not suggest they were all responsible. Social Security was never meant to be the primary source, just a supplement even dating back to the original program under Bismarck in Germany. Social Security was meant to supplement the income sources that workers had built up over their working lives. In that sense, we cannot just end Social Security as we know it as too many irresponsible Americans now count on it for their sole source of income. However, it can be saved for the rest of us and made to be far less discriminatory. And force Americans to be more responsible.
Social Security at the moment taxes a portion of a worker’s earned income. But come retirement, if you make a certain amount, your benefits are reduced, even if you contributed the maximum every year. That is patently unfair, unjust and un-American. At least with taxes there can be made an argument that the rich benefit from the system more then the poor therefore justifying higher taxes. No such argument exists for the inequalities of Social Security. Furthermore, Social Security has been wrongly treated as a piggy bank by Democrats and Republicans for years, replacing Social Security funds with little slips of IOUs and allowing the Federal Government to live well beyond its means.
Guaranteed annuities fixes these problems. Each person’s contributions are not pooled but kept seperate. So Bob Millionare gets to keep his contributed income rather then see it all get taken away. Furthermore, by keeping it as an annuity, the amounts are known. With a baseline of retirement income, retirees can plan just how much they will need as primary income. On top of that, by keeping each person’s income tied specifically to them and not pooled, it cannot be easily treated like a piggy bank. Many of the safety net functions of Social Security can be added to guaranteed annuities while solving the problems of our current system.
The program of course would be mandatory as Social Security is. While Libertarians do have a valid point for allowing opting out and opportunity cost, far too many people have lost everything and turned to welfare. In that regard, it is morally wrong to force those who were responsible for their own retirement to pay for the retirement of those who took too many risks and were forced to turn to the state. America does not leave people on the street to die. Nor should we allow provisions that would create the scenario of more welfare or shoving the less fortunate out the door into the cold.