Frank Martin from TN posted over 8 years ago:

Social security is the perfect retirement income generator? Social Security is the perfect wealth redistributor. The benefit formula is deliberately designed to function just like a steeply progressive income tax. Those on the low end of the income scale get back more in benefits relative to what they paid in than do those higher on the income scale. Most middle income and up people would have been far better off if they had been able to invest those FICA taxes (including the allegedly employer paid portion - which is really also paid by the employee) in an a low cost stock index fund. They would have far more money for retirement and they would have a property right to that wealth and not merely a government promise to pay them in the future. Furthermore, Medicare Part B premiums are deducted from Social Security benefits and those premiums are being jacked up by the federal government. And those who have higher levels of other income get further penalized by being charged even higher amounts for Medicare Part B.

Martin Sullivan from NJ posted over 8 years ago:

Well said Frank. I'm not sure how the disparate "benefits" benefit those who actually were able to eek out a bit more than others. Its merely another slighly hidden means to reward/subsidize and offer by proxy, a punishment t o others. A broken system that needs graet overhaul.

William Lines from FL posted over 8 years ago:

When discussing Required Minimum Distribution why isn't transfers of funds discussed. Under the rules for RMD withdrawals, a retiree not in need of funds withdrawn can instead transfer the money and/or shares of a stock he would rather not sell, to a taxable account. By doing so an investor retains ownership of both the money and/or the stock. Any money thus retained can be deployed in a manner of his, or her, choosing. Sure, all such transfers are still subjected to taxation.

Glenn Catalano from VA posted over 8 years ago:

Frank has an excellent grasp of the redistribution aspect of the Social Security plan. The point not addressed, is simply, that we have decided to care for those who are less able to care for themselves. We do not wish the elderly to have less than an adequate diet when they are no longer able to earn a living. On the other hand we should be looking very closely at the "disabled" and their inability to work. In my very limited experience I have seen several SSDI recipients working in the "underground" economy full-time. Frank is completely is completely correct though. A low cost stock index fund would serve middle income investors better than Social Security.

Craig Borgardt from WI posted over 8 years ago:

I agree with Frank. I have purposely NOT "done the math" looking at ALL of my FICA contributions including the employer portion as I would no doubt be sickened by the result. Heck, in my 40 years of work life I could've stuck all of it into a Medium-Long Term Treasury Fund and likely have been so much better off that instead of thinking about working to cover expenses (0.8 FTE !!!) I would've been able to fully retire at 55 like my teacher friends have. And that would include buying my own health insurance. So while Social Security has morphed into another redistribution scheme, "it is what it is" as they say and the article properly addresses that. I'd rather spend energy now working towards privatizing Social Security and allowing each worker to have their own account with maybe a dozen basic equity and bond index funds to choose from, initially set up automatically but able to be adjusted within limits. THAT would make me feel better about my son's and the grandchildren's eventual retirement prospects. I do appreciate AAII's ongoing and persistent efforts to educate and improve my investing knowledge AND behavior. I wish I'd have engaged it twenty years ago. And so goes life...

David Dumais from MA posted over 8 years ago:

The Government got this right when they introduced the Thrift Savings Plan (TSP) for their employees back in the early 1980's. There's 5 options to select (mix & match) from and they have life cycle funds with various combinations of these 5 options: C Fund = SPY I Fund = EFA S Fund = VTI F Fund = AGG G Fund = Government Bonds (haven't figured out if this tracks to)

Craig Butcher from MI posted over 8 years ago:

Some comments here indicate a view of Social Security's purpose that is understandable but completely wrong. Complaining about SS because it does not yeild what we(imagine) we might earn by investing the money is entirely off base. SS is not an investment program. It is (supposed to be) insurance. If you want to have a comfortable retirement, you need to save and invest as well as pay SS taxes. If you are fortunate, you will have sufficient income to choose to do this, and on your own head be it if you don't. Many, for countless various reasons, are not so fortunate. SS does redistribute wealth. It was supposed to. So does any insurance. Opinions vary whether redistribution is fair, and whether it is wisely arranged, but redistribution is what it is for. FDR on signing the act: "This social security measure gives at least some protection to 30 millions of our citizens... "We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life. "But we have tried to frame a law which will give some measure of protection to the average citizen and his family against the loss of his job and against poverty-stricken old age." The guy who complains he may die before collecting any SS is as off base as the guy who feels cheated because he makes all those home insurance payments but his house never burns down. Or that the mortgage holder should let him cancel the home insurance policy and invest the payment stream instead. 24% of those aged 65 and over live in families that depend on Social Security benefits for 90% or more of their income. Another 26% receive at least half but less than 90% of their family income from Social Security. If a sense of moral obligation seems insuffient to justify a SS system, consider this: 24% of those aged 65 and over live in families that depend on Social Security benefits for 90% or more of their income. Another 26% receive at least half but less than 90% of their family income from Social Security. (https://www.aarp.org/content/dam/aarp/research/public_policy_institute/econ_sec/2012/Social-Security-Whos-Counting-on-It-fs-252-AARP-ppi-econ-sec.pdf) Without the redistributive subsidy of Social Security, that's an awful lot of potential sans culottes... who, sufficiently motivated by destitution, could elect to combine and take from me, not only the my redistributed share currently provided by SS, but the entirety of my actual savings, property, and perhaps even life.

Michael Vanous from Maryland posted over 8 years ago:

I certainly agree with postponing SS claiming until 70. Surely they meant investing in equities like ETFs and index funds rather than individual stocks. Too bad they don't know about "Investing at Level 3." That is my plan.

Matt Schott from NC posted over 8 years ago:

“Economic Justice can best be won by free men through free enterprise.” The above line is part of the Jaycee Creed which I along with hundreds of other young men across the country recited at our local chapter meetings. I still remember the creed today, 40 years later. Social Secuity is one mechanism to get us closer as a society to economic justice. It requires 40 quarters of work to qualify and the benefit is based on the highest 35 years of qualified earnings. So it rewards a lifetime of work and yes it’s benefits are slanted to lower paid workers who have no financial capital on which to rely. In the US, the top 1% hold roughly 40% of the wealth and the next 9% hold close to another 40%. That leaves a little over 20% of the wealth for the remaining 90% of the households. That doesn’t strike me as a just economy or a just distribution of wealth. Most in the top 10% got there from extracting human capital from the bottom 90%. If anyone wants to squawk about redistribution of wealth, this is the place to look. Perhaps the we need a change of creed to “economic justice can best be won by wise men through free enterprise.”

Michael Murray from VA posted over 8 years ago:

A simple retirement plan, work till you die. The socialists, or is it the capitalists, have won. Either way, I think the middle is losing. I can’t believe I pay for these insightful articles some times. Thx?

Frank Martin from TN posted over 8 years ago:

Social security is not "insurance" as another poster has claimed. Real insurance is a voluntary transaction between private parties. Anything involving government force (and government is nothing but force) cannot be "insurance". It is merely a forced redistribution of wealth - in essence a theft of private property from those who own to give to those who do not. And there has never been anything "moral" about that. Charity is voluntary individual choice to make - it is not a "collective" choice to make. As for the term "economic justice" also mentioned by another poster - there is simply no such thing. That term is merely another euphemism for socialism.

Frank Martin from TN posted over 8 years ago:

Another thing about Social Security that most people don't know: the only reason it ever got enacted was bribery using the taxpayers money. When FDR was trying to get Social Security through Congress, a North Carolina Congressman named Robert Doughton was the chairman of the powerful House Ways and Means committed. Doughton was opposed to the Social Security legislation and FDR knew he could not get it through Congress without Doughton's support. One of so-called "New Deal" projects in the works at that time was the Blue Ridge Parkway. The original route was planned to go through Tennessee and into Virginia. But FDR bribed Doughton into changing his position and supporting the Social Security legislation by changing the route of the Blue Ridge Parkway so that it would go through North Carolina instead of Tennessee. And that is how Social Security became law.