Social Insecurity – A Government Slush Fund, Not A Retirement Plan

Generations have become dependent upon a government program that offered a safety net following the Great Depression. Never again would hard working Americans ever have to worry about having enough in retirement. The problem is Government couldn’t keep its grubby little hands out of the Social Security cookie jar. If I could change one thing about how Americans can build wealth for retirement, I would provide all the opportunity to invest their portion of the SSDI tax into personal retirement accounts that are tax favored. The contributions can be written off and the growth is not taxable, ever. Then questions like this would never have to be asked again.

Knowing that I will have social security in retirement, why should I focus so much on building wealth?

Let me start by saying that it is not my intension to offend anyone with my answer, but I am labile to ruffle a few feathers here. There are those who call social security an entitlement program and there are those who vehemently argue that they paid into it so it is not an entitlement – it is a right. I do not want to get into the middle of that argument, so let me just say that both sides are technically correct. It is both an entitlement program and a right. Why do I say that? Because there are programs within the program that are paid out to those who have never contributed. 

It helps to know exactly what programs fall under the title of Social Security. There are Social Insurance Programs such as Old-Age, Survivors, and Disability Insurance (OASDI), but there is also Unemployment Insurance, Workers' Compensation Insurance and Temporary Disability Insurance. All of these are part of the Social Security insurance program.

There are Health Insurance and Health Services programs such as Medicare and Medicaid. There are Programs for Specific Groups such as Veterans' Benefits, Government Employee Retirement Systems, and Railroad Retirement Benefits. Then there are the Assistance Programs such as Supplemental Security Income, Temporary Assistance for Needy Families, Food and Nutrition Assistance, Housing Assistance, Low-Income Home Energy Assistance, General Assistance, and Earned Income Tax Credit.

Social Security is an umbrella term used to describe a number of programs that, in some cases, give back to those from whom it was taken, and in other cases, give to those who have not contributed. In either case, no one has ever told me that they became wealthy because of their social security check. Your goal for retirement should be that Social Security is a bonus you receive at the beginning of every month for being a productive member of society. The core of your retirement plan should be the wealth you’ve built, not the scraps the government provides.

Let’s face it, Social Security is a full blown Ponzi scheme. I am just calling it what it is. The structure of the plan is a redistribution philosophy: take from those who worked hard their whole life with a promise of “security” in later years and distribute it to those who are able to work, but don’t. For those who have worked hard, the return on investment is much smaller than it would have been if the money was invested in a tax-favored account.

If anything, Social Security is quickly becoming a Social Lack-of-Security program. At the time it was created it might have looked promising. As often is the case with politicians though, they used a crisis (the market crash in 1929 and difficult economic times) to take advantage of the people and they didn’t look far enough down the road to see the complications and residual effects of mismanagement and changing demographics.

Social Security is nothing more than the current wage earners paying for the retirement of past wage earners and others who may need social assistance. The money contributed (actually stolen) from past wage earners has been used by the government for its intended purpose, but also for extras beyond its original intent. The lock box has become a slush fund for government pet projects and programs designed to keep the people dependent.

Certainly, past wage earners contributed, but with the average life expectancy increasing and the assets being used for benefits that were not part of the original program, the system is, for all intent and purposes, broken. Just as the antiquated pension system eventually succumbed to the pressures of an ever increasing retired population, the social security system will too, succumb. If you are not currently receiving social security, plan on never receiving it and take responsibility for your own retirement.

Having the mentality that Social Security is not a retirement plan makes it easier to accept when the government begins to reduce the payout because it does not have the money to meet its obligations. The Social Security system is a dependency system and a dependency system always reduces your standard of living. I know this response is not the most uplifting, but it is honest. If you have dreams you want to live out in retirement, don’t plan on doing it with government assistance. For those who still have time, use Social Security as a bonus plan and not a primary source of retirement resources.