When the feds step in, Americans lose. A new report from the Heritage Foundation has found that Social Security robs Americans of greater income before and after retirement. Check out the excerpt below.
Social Security takes a whopping 12.4 percent of American workers’ paychecks, but a new backgrounder by The Heritage Foundation shows that workers are getting a bad deal from the program.
Despite its popularity, Social Security typically provides very low—and in many cases, negative—rates of return.
Although the program provided high returns and windfall benefits to its earliest recipients, Social Security is no longer a good deal for workers.
The Heritage Foundation analysis shows that younger workers—even low-wage ones—would receive at least three times greater rates of return from private savings than Social Security will provide.
To assess Social Security’s so-called “rate of return,” Heritage’s analysis compares what workers would receive if their payroll taxes were invested in personal accounts compared with what Social Security will provide under two scenarios: 1) current law, with roughly 20 percent benefit cuts beginning around 2034; and 2) a scenario whereby payroll taxes rise immediately to a level necessary to pay the program’s prescribed benefits.
While virtually all workers—across income levels, both genders, and generations—would be far better off with personal savings than Social Security, younger workers get the worst deal from the government program.
The average young male worker is virtually guaranteed a negative rate of return from Social Security. Take these hypothetical examples:
Marc Perez is 23 years old and earns an average income of $60,006 per year. He will pay $547,088 in Social Security taxes (excluding disability insurance taxes) throughout his lifetime. In return, he will receive a monthly benefit of $2,209 in retirement.
If he instead invested that same amount—$547,088—in a conservative mix of stocks and bonds, he would accumulate more than $1.5 million in a retirement account and could use that to purchase a lifetime annuity that would pay him $6,185 per month, or nearly three times what Social Security will provide.
Even lower-income earners, like Ashley Martin, who generally receives higher returns from Social Security, would be better off saving and investing in their own personal retirement accounts.
Click here to read two more examples.
Americans don't want more federal involvement in their personal lives -- they want less. That's what the Convention of States Project is all about. A Convention of States can propose constitutional amendments that restrict federal power and jurisdiction and restore decision-making power to the people and the states.
