Social security is an abomination. If you ask the average person, they will tell you it is a great example of what socialism represents. What it is in reality is a glorified Ponzi scheme.
Here is how it works: You have a job that pays you $35,000 dollars a year. You pay 12.4% of your pay in Social Security tax (one half by you, one half by your employer). That tax totals $4,340 per year.
When you turn full retirement age (66-67 years of age) you will get an average Social Security check of $1,200 per month. This will last the rest of your life, with increases for inflation happening sometimes. This looks like a good deal, but let’s go into it just a little…
If you started doing this at age 18, and you only made $35,000 a year the rest of your life, that would be 49 years of $4,340, or a total of $212,660. That is with no gains added, just the amount taken out of your paycheck for the entire 49 years. If you could have averaged just 5% return on your money (that would be a safe investment), you would have $913,961 at your age 67. If you averaged an 8% return over that 49 year period, you would have $2,644,635!
Let’s look at the lower of those two numbers, $913.961. If you kept getting the same, low return of 5% on your money, you could start withdrawing $5,000 a MONTH for the rest of your life, without ever having a loss of your funds! In other words, you would get 4.2 times the amount per month than what the Social Security system will pay you for putting the same amount of money into their system! And that was the lower of those two return rates of 5% and 8%!
But that is not the worst of it… If you die before or after you start drawing out of Social Security, the government keeps all of your money! Your family gets nothing! Oh, I am sorry, I forgot about the $255 that they will pay the family for the funeral! Stop laughing, I am serious! Sure, if you have a spouse and that person out-lives you, then they can get your Social Security check, if it is larger than the one they get! Don’t let that one go by without thinking about it… say both spouse have worked their entire life, and both are getting Social Security checks…when one of them dies, the remaining spouse will get the higher of the two checks, plus a $255 onetime payment for the funeral! The other Social Security check is confiscated by the government!
But, if the person could have invested the money into an account in their own name, not only would they have a lot more money to live on, but they would also have whatever money that is in there go to their heirs when they die!
By the way, what about that $2,644,635 amount if your money had grown by an average of 8% a year for those 49 years? Well, that would have paid you $14,000 A MONTH for the rest of your life, and still pay your heirs over $2,000,000 if you died at age 85!
And, of course, most people working for over 49 years get paid more than $35,000 a year…the more you make, the more you pay into the system, and the worse the outcome!
There is no such thing as a good or necessary socialist program.
J P Richardson is an investment adviser with Richardson Financial Services in South Carolina. He may be reached at 803-300-9286, 833-790-4285 or via email at: rfsi@atlanticbb.net.
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This article was edited 3-24-20.
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