I agree with most of what you’ve said, except this part. Social Security is not a loan to the government that is repayable. You have no balance with the government, and your benefits are purely at the whim of Congress. Furthermore, you can qualify for Social Security with a tiny amount of contributions (just $4400/yr in wages for 10 years, which is only about $6600 in contributions, even if we include the employer’s half) which will not even come close to paying your benefits. Heck, the government doesn’t even look at every year in which you’ve had earnings: only the top 35 years of income are considered. High wage earners only get credit for a percentage of their wages even though they paid the tax on all of the wages up to the SS limit each year (about $110,000 now).
We can look at all kinds of pros and cons with Social Security, but the idea that it’s anything like a loan or a 401k is just plain wrong. It’s a government benefit, paid for from tax revenue.
No, of course I’m not. Govt regulations wouldn’t be able to force companies to pay out if there were no money to pay out. Actual cash is worthless in itself.
Depends on what you mean by “not even close”. If you plug in to the Social Security estimator, you get only around $100 in monthly benefits for 10 years of work at $4400 a year. This jibes with my understanding, which is that your social security benefits are based on your total monthly income divided by 35, (throwing out the low numbers if you’ve worked more than 35 years).
This $100 is indeed almost twice what you’d get from an immediate annuity assuming it earned money at inflation before payoff at age 65. But it’s not as ridiculous at it seems considering that this very low wage earner likely does not have a substantial stash of cash elsewhere. It’s basically one of the good things that SS does. For many people who made minimum wage all their life it makes the difference between having a roof over their head and not.
Other than the increased payouts that accrue to the lowest tier, it’s just a form of forced savings, coupled with wealth transfer from the upper middle class to the working poor (which isn’t bad on the face of it but should be paired with taxes on the rich as well, if subsidizing the incomes of the poor elderly is what the nation as a whole desires.)
Yes, SS is a bad example of a real pension, in that it is Social Security- a supplement to working people in old age. So, IIRC the benefit is the same whether 10 years of contributions happened 35 to 25 years ago, or the last 10 years. OTOh, many regular pension plans were gamed in a similar way - when NYC went broke several decades ago, one problem was that the transit union (among others) ensured that about–to-retire workers spent the last few years getting all the overtime offered, so their pension earnings were well above regular wages.
But SSI is a social program as much as a pension fund. The theory was that the exceptions were balanced by the ones where contributions were higher than payouts, and if not, congress would makeup the difference. The trouble is, current demographics make that difficult.