NCPA - National Center for Policy Analysis

Social Security Benefit Statements Show Unhappy Returns

December 7, 1998

Tomorrow, President Bill Clinton hosts a White House conference on Social Security, the culmination of his oft-stated promise to "save" the retirement system. The real problem with Social Security is that it is a terrible deal for almost everyone presently working.

In an effort to convince people that Social Security is still a good deal, the Social Security Administration now sends out personal statements telling people what they have paid in and what they will get at retirement. My statement says that through 1997 I have paid in $47,576 to Social Security and can expect a monthly check for $1,540 at age 65.

However, the statement lists only those taxes paid by me as an employee -- with the taxes paid by my employers on my behalf, my true Social Security contribution was $95,152.

  • Also, according to my calculations, had I steadily invested all my Social Security taxes in a S&P 500 index fund since 1968, when I entered the labor force, I would have had $464,655 by the end of 1997.
  • With no additional contributions and the same compounded rate of return, this fund would grow to $4,070,400 by 2016, when I will turn 65.
  • Even if I just took the money Social Security had collected from me and my employers through 1997 and invested it the same way, I would still have $833,536 by 2016.

Clearly, either alternative would pay vastly more than what Social Security is promising me. And I would never have to pay Social Security taxes for the rest of my life to achieve it. Adding future contributions to the calculation would increase these estimates several times. As workers compare their Social Security accounts with their 401(k) accounts, more and more of them undoubtedly will decide that the time to privatize Social Security has come.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, December 7, 1998.


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