# A Quiet Flaw in US Social Security?

**URL:** <https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354>\
**Category:** Factual Questions\
**Created:** [June 12, 2006, 12:05am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354 "2006-06-12T00:05:13Z")\
**Posts on this page:** 20\
**Page:** 1

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**Author:** ![Jinx](https://avatars.discourse-cdn.com/v4/letter/j/c6cbf5/32.png) [@Jinx](https://boards.straightdope.com/u/Jinx)\
**Post date:** [June 12, 2006, 12:05am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/1 "2006-06-12T00:05:13Z")

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This is a factual question not trying to start a debate of any kind. Maybe I’m naive, but has it ever, ever been mentioned that, as Uncle Sam collects dollars into Social Security, each $1 USD taken away from you yesterday \< $1 USD returned ages later? Or, is there some compensation for the shrinking $1 USD? (I seriously reckon not to the last part of the question.)

Admin, if this question is toeing the line and might be perceived as inflammatory as waving a red flag before a bull, please feel free to bump. I do not wish this to be a debate…just the facts, folks!

…and that’s the truth! Phththththth! (Little Edith Ann)

- Jinx

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**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\
**Post date:** [June 12, 2006, 12:08am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/2 "2006-06-12T00:08:53Z")

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The answer to your factual question is yes: it has been mentioned, millions of times. Every single calculation about the future has an inflation correction built in.

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**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\
**Post date:** [June 12, 2006, 12:24am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/3 "2006-06-12T00:24:03Z")

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> [@Jinx](#):
>
> each $1 USD taken away from you yesterday \< $1 USD returned ages later?

Isn’t your equality sign flipped here? A dollar today should be worth _more_ then a dollar in the future due to inflation.

In anycase, SS benefits are indexed to inflation. I belive on of the proposed solutions to possible future shortfalls was to change how the inflation rate was computed (pinning it to wages rather then prices, if memory serves), which would have the predicted effect of lowering benefits.

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**Author:** ![Lumpy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lumpy/32/446_2.png) [@Lumpy](https://boards.straightdope.com/u/Lumpy)\
**Post date:** [June 12, 2006, 12:41am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/4 "2006-06-12T00:41:02Z")

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And in any event Social Security is not a dollar-for-dollar retirement fund. The majority of people will collect more in benefits than they paid in, or at least that’s what’s happened up to now.

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**Author:** ![ombre3](https://avatars.discourse-cdn.com/v4/letter/o/da6949/32.png) [@ombre3](https://boards.straightdope.com/u/ombre3)\
**Post date:** [June 12, 2006, 3:13am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/5 "2006-06-12T03:13:35Z")

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Interesting question really.

I am 63 years old and drawing SS.

And they do send me, as they send all of us, a yearly statement of our lifetime earnings. Fascinating reading actually. I never realized how little my 75 cents an hour in 1962 really amounted to.

And of course my SS benefit is based on an average of 35 years of working.

So -------is that 75 cents an hour that I earned busting my very young butt in 1962 really recognized for the value it was back then------as against the probably $6 an hour it would pay today?

Are we old farts getting screwed by SS?

(Not complaining all that much. ------SS money is like fun money to me. ----- Just curious ab out how it all works inflation wise)--------and is it done fairly?

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**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\
**Post date:** [June 12, 2006, 4:25am UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/6 "2006-06-12T04:25:15Z")

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There’s another effect.

Social security is not primarily a retirement program. It also pays out benefits to survivors of social security recipients as well as the disabled. So it has some insurance aspects.

[http://www.ssa.gov/pubs/10084.html](http://www.ssa.gov/pubs/10084.html)  
[http://en.wikipedia.org/wiki/Social\_Security\_(United\_States)](http://en.wikipedia.org/wiki/Social_Security_(United_States))

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**Author:** ![Jombi](https://avatars.discourse-cdn.com/v4/letter/j/f19dbf/32.png) [@Jombi](https://boards.straightdope.com/u/Jombi)\
**Post date:** [June 12, 2006, 1:47pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/7 "2006-06-12T13:47:20Z")

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Social Security is not, and never was or was intended to be, a savings account for Americans. You don’t put money in for your retirement and then the money doles it back to you at a given time.  
Social Security is a government program that collects money as a tax and uses that money to fund payments to all the currently eligible people. The amount you’re eligible for does depend on a calculation of how much you paid in to the system over the years, but it’s not even close to a one-to-one repayment of your contributions. Most people end up getting far more than they paid in, and many people are eligible for payments without having paid in a single dollar.  
The effects of inflation have a major impact on the sustainability of the program, though.

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**Author:** ![flex727](https://avatars.discourse-cdn.com/v4/letter/f/258eb7/32.png) [@flex727](https://boards.straightdope.com/u/flex727)\
**Post date:** [June 12, 2006, 4:13pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/8 "2006-06-12T16:13:04Z")

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> [@Malodorous](#):
>
> Isn’t your equality sign flipped here? A dollar today should be worth _more_ then a dollar in the future due to inflation.
> 
> In anycase, SS benefits are indexed to inflation. I belive on of the proposed solutions to possible future shortfalls was to change how the inflation rate was computed (pinning it to wages rather then prices, if memory serves), which would have the predicted effect of lowering benefits.

Now YOU have it backwards. The proposed change is to compute the benefit change based on prices, rather than wages as it is based on now.

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**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\
**Post date:** [June 12, 2006, 11:49pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/9 "2006-06-12T23:49:35Z")

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> [@ombre3](#):
>
> Are we old farts getting screwed by SS?

Generally, no (except in the sense that the vast majority of people don’t get as much out of SS as they pay in, since it’s an insurance system). At its heart, SS is a massive transfer of wealth from the young to the old. It’s we whippersnappers who are getting screwed.

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**Author:** ![UncleBeer](https://avatars.discourse-cdn.com/v4/letter/u/977dab/32.png) [@UncleBeer](https://boards.straightdope.com/u/UncleBeer)\
**Post date:** [June 13, 2006, 1:41pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/10 "2006-06-13T13:41:32Z")

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> [@iamthewalrus(:3=](#):
>
> . . . the vast majority of people don’t get as much out of SS as they pay in. . .

This is flat wrong. Think about it for a minute. If people were getting **less** than they paid in, then the program wouldn’t be in all the trouble were told. There would be a positive balance in the so-called trust fund in perpetuity.

Yeah, there’s a suplus _currently_\*, because workers today are paying more into the fund than the benefit payments going out of it, but with the current funding levels and benefit structure, that’s gonna change - in about 2040. In that critical year, it is projected that outlays will exceed revenues.

You’re also neglecting a couple other sources of revenue to the fund. First, the interest the fund is earning on the bonds it holds. By law, all assets held by the SSA are invested in interest bearing U.S. federal bonds. The entire current surplus consists of bonds. That interest, which is in addition to the principal (your taxes) is also paid out as benefits.

Second, your payments into the fund are only **half** of the story. Your employer pays into the fund an amount equal to that deducted from your paycheck. (Unless you’re self-employed, of course. Then you are paying the whole nut.)

[http://www.ssa.gov/qa.htm](http://www.ssa.gov/qa.htm)

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**Author:** ![UncleBeer](https://avatars.discourse-cdn.com/v4/letter/u/977dab/32.png) [@UncleBeer](https://boards.straightdope.com/u/UncleBeer)\
**Post date:** [June 13, 2006, 1:45pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/11 "2006-06-13T13:45:28Z")

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> [@UncleBeer](#):
>
> Yeah, there’s a suplus _currently_, because workers today are paying more into the fund than the benefit payments going out of it

I need to make a minor revision to this statement. It should read:

> [@](#):
>
> Yeah, there’s a suplus _currently_, because revenues to the fund today are greater than the benefit payments going out of it

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**Author:** ![The\_Controvert](https://avatars.discourse-cdn.com/v4/letter/t/dec6dc/32.png) [@The\_Controvert](https://boards.straightdope.com/u/The_Controvert)\
**Post date:** [June 13, 2006, 4:07pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/12 "2006-06-13T16:07:51Z")

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So, what’s the story with Al Gore’s Social Security Lockbox?

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**Author:** ![UncleBeer](https://avatars.discourse-cdn.com/v4/letter/u/977dab/32.png) [@UncleBeer](https://boards.straightdope.com/u/UncleBeer)\
**Post date:** [June 13, 2006, 4:14pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/13 "2006-06-13T16:14:16Z")

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Who’s Al Gore?

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**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\
**Post date:** [June 13, 2006, 4:25pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/14 "2006-06-13T16:25:10Z")

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> [@UncleBeer](#):
>
> Who’s Al Gore?

My president.

When SS starts to try to collect on all those IOUs it has been accumulating, that’s when feces meets fan. If you think the deficit is bad now, wait till SS is contributing red ink and not black.

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**Author:** ![Freddy\_the\_Pig](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@Freddy\_the\_Pig](https://boards.straightdope.com/u/Freddy_the_Pig)\
**Post date:** [June 13, 2006, 4:32pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/15 "2006-06-13T16:32:43Z")

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> [@UncleBeer](#):
>
> Yeah, there’s a suplus currently, because workers today are paying more into the fund than the benefit payments going out of it, but with the current funding levels and benefit structure, that’s gonna change - in about 2040. In that critical year, it is projected that outlays will exceed revenues.

Actually, the [Social Security Administration](http://www.ssa.gov/OACT/TRSUM/tr06summary.pdf) projects that outlays will begin exceeding revenue in **2017**. In 2040 the trust funds will have been exhausted.

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**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\
**Post date:** [June 13, 2006, 5:06pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/16 "2006-06-13T17:06:17Z")

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> [@The Controvert](#):
>
> So, what’s the story with Al Gore’s Social Security Lockbox?

I think the plan was to use surpluses to pay down the national debt, and reserve (put it in a lockbox) the money saved in not having to make interest payments on that debt to cover future SS shortfalls.

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**Author:** ![Clothahump](https://avatars.discourse-cdn.com/v4/letter/c/51bf81/32.png) [@Clothahump](https://boards.straightdope.com/u/Clothahump)\
**Post date:** [June 13, 2006, 5:11pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/17 "2006-06-13T17:11:30Z")

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A quiet flaw?

There’s nothing quiet about it. SocSec is a giant Ponzi scheme, and it is reaching critical mass.

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**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\
**Post date:** [June 13, 2006, 5:12pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/18 "2006-06-13T17:12:49Z")

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> [@Clothahump](#):
>
> A quiet flaw?
> 
> There’s nothing quiet about it. SocSec is a giant Ponzi scheme, and it is reaching critical mass.

Forum man. Forum.

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**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\
**Post date:** [June 13, 2006, 5:30pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/19 "2006-06-13T17:30:29Z")

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Are any pensions plans different? When I left AT&T my traditional pension went to Lucent. It still exists, but since I wouldn’t have worked for them for at least 20 years when I actually can get something out, I’m not expecting much for the same reason the OP gives. Pensions are designed to pay reasonable benefits only if you’ve been working up to retirement. Inflation cuts the value if there is a big gap.

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**Author:** ![Malodorous](https://avatars.discourse-cdn.com/v4/letter/m/e47774/32.png) [@Malodorous](https://boards.straightdope.com/u/Malodorous)\
**Post date:** [June 13, 2006, 5:52pm UTC](https://boards.straightdope.com/t/a-quiet-flaw-in-us-social-security/360354/20 "2006-06-13T17:52:52Z")

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> [@Voyager](#):
>
> Pensions are designed to pay reasonable benefits only if you’ve been working up to retirement. Inflation cuts the value if there is a big gap.

Wait, didn’t we just decide SS benefits are indexed to inflation? So, in theory, it shouldn’t matter if you worked a year in 1920 or a year in 1999 for the same salary in real dollars, you should get the same benefits out when you retire. Am I incorrect?

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