# Social Security: Input vs. output
**URL:** https://boards.straightdope.com/t/social-security-input-vs-output/670981
**Category:** Factual Questions
**Created:** [October 11, 2013, 2:21pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981 "2013-10-11T14:21:41Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)
#### Post date: [October 11, 2013, 2:21pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/1 "2013-10-11T14:21:41Z")
Someone posted this in another thread:
> [@](#):
>
> Well no, your tiny medicare tax payments aren’t paying for the thousands you’re collecting on it when you’re old. It’s like any other insurance program - your expenses are being heavily subsidized by those who are nowhere near collecting and may not ever collect. Likewise, there’s no chance in hell that your lifetime of paying Social Security taxes ever comes close to the amount you will end up collecting.
I believe this used to be true; people received more in Social Security benefits than they contributed. But ISTR reading that this is no longer the case, and that people will receive less in benefits than they contribute. (Not that I have a problem with that.)
What’s the dope?
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### Author:  [@Ludovic](https://boards.straightdope.com/u/Ludovic)
#### Post date: [October 11, 2013, 2:33pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/2 "2013-10-11T14:33:38Z")
It’s definitely not true if you don’t count employer contributions. If you do, then it comes out nearly equal for most people as seen below.
There are three different “tiers” based on your average monthly income adjusted for inflation. Up to around minimum wage you get a monthly SS check equal to 85% of your average monthly income, which equates to much more than you put in if you live an average lifespan.
The next tier is 35% and it is good up until around 50K a year, but much like income tax, it is marginal so you still get some of your income back at 85%. 35%, by my calculations, is _roughly_ what you put in, so people in this bracket still get back more than they put in on average (tho I may be wrong.)
But then there are the high income earners who, past a certain point, only get reimbursed by SS to the tune of 15% of their monthly income (up to the SS maximum which is over 100K.) For this bracket you get a lot less back than what you put in, but are still getting some of your income back at 85%. By my calculations, and they may be wrong, most people _who don’t die too early to collect_ are getting around as much or more more than they put in unless they earn over 100K.
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### Author:  [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)
#### Post date: [October 11, 2013, 3:36pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/3 "2013-10-11T15:36:53Z")
There’s no way of knowing what future changes to the system will do to contributions and benefits. What people are putting in or getting out 10 or 20 years from now may look very different from what’s happening today.
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### Author:  [@Voyager](https://boards.straightdope.com/u/Voyager)
#### Post date: [October 11, 2013, 4:34pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/4 "2013-10-11T16:34:11Z")
> [@Johnny\_L.A](#):
>
> Someone posted this in another thread:
>
> I believe this used to be true; people received more in Social Security benefits than they contributed. But ISTR reading that this is no longer the case, and that people will receive less in benefits than they contribute. (Not that I have a problem with that.)
>
> What’s the dope?
Inflation adjusted or non-inflation adjusted? In non-inflation adjusted terms I’m certain people get more than they contribute on average, counting employer contributions as contributions on the somewhat laughable assumption that the employee would get them. In inflation adjusted terms I don’t know. If it was done purely statistically I’d say it would be break even, but politics could have been involved.
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### Author:  [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)
#### Post date: [October 11, 2013, 4:46pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/5 "2013-10-11T16:46:55Z")
In addition to what Ludovic posted, other variables are age that payment starts, marital status, whether a spouse contributes, and total length of payments. Any individual, therefore, could possibly see a negative return.
Overall, the bulk of recipients do come out ahead. This analysis is from [Portland State University](http://web.pdx.edu/~psu01435/ss95.html).
> [@](#):
>
> Payback for Current Retirees
> Although soon-to-be-retirees who paid the maximum payroll tax over their careers may find themselves roughly breaking even, the majority of retirees are coming out comfortably ahead. Low-income earners will continue to do so, while some average-and high-income earners will see an erosion in what their money is worth, by the middle of the next century, where they may not break even. However most higher income earners have savings and other investments in addition their Social Security benefit income.
>
> For example, an individual who retires this year at age 65 after paying the maximum SS payroll tax will get his or her money back in 10.5 years, if only the retiree’s payroll taxes are counted. But it will take 25.6 years if the employer’s taxes are also considered. (If the retiree is married to a non-contributing spouse, the couple will get their money back in 15 years.)
>
> Moderate earners will do much better. A person retiring this year with average earnings, he or she will get money back in 7.9 years, if only the retiree’s taxes are counted, and 18.5 years if both employer and employee taxes are considered. (It will take just 11 years, however, if the retiree has a noncontributing spouse.) These rates of return aren’t unreasonable when life expectancy is taken into account. The average remaining lifetime is expected to be 15.3 years for males retiring at 65, and 19.1 years for females.
> Payback for 2012 Retirees
> Unquestionably, people retiring after 2012 will realize smaller returns than today’s retirees, a development that’s inevitable with the maturing of the system. Unmarried, maximum earners may actually get a negative return on their contributions. For example, a maximum-earning, single worker retiring at 66 in 2015 will need 47.1 years to get back his and his employer’s taxes (compared to 25.3 years for a married retiree with a noncontributing spouse).
>
> Moderate-income workers will do better. A single worker with average earnings retiring at 66 in 2015 will need 29 years to get back combined employee-employer taxes, while a couple with a noncontributing spouse retiring with average earnings will require 17.1 years.
You could argue that current retirees are closer to breakeven, but with age spans getting longer that might change by the time 17 years go by.
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### Author:  [@NeonMadman](https://boards.straightdope.com/u/NeonMadman)
#### Post date: [October 11, 2013, 5:41pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/6 "2013-10-11T17:41:24Z")
I haven’t done the math on this, but I have a sneaking suspicion that if I had managed to sock away 15.3% of every dollar I’ve earned since I started working in 1968 (which is my SS contribution plus my employers’), I’d have enough of a nest egg to have a much nicer income in retirement than SS is likely to provide, and I wouldn’t have to rely on the whim of the government as to whether it would honor its promise to pay. Also, I could pass the nest egg on to my heirs when I die. Social Security strikes me as something we would have been better off without as a nation. Basically, it’s just another tax that the government can use as it sees fit.
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### Author:  [@NeonMadman](https://boards.straightdope.com/u/NeonMadman)
#### Post date: [October 11, 2013, 5:51pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/7 "2013-10-11T17:51:27Z")
> [@NeonMadman](#):
>
> I haven’t done the math on this, but I have a sneaking suspicion that if I had managed to sock away 15.3% of every dollar I’ve earned since I started working in 1968 (which is my SS contribution plus my employers’), I’d have enough of a nest egg to have a much nicer income in retirement than SS is likely to provide, and I wouldn’t have to rely on the whim of the government as to whether it would honor its promise to pay. Also, I could pass the nest egg on to my heirs when I die. Social Security strikes me as something we would have been better off without as a nation. Basically, it’s just another tax that the government can use as it sees fit.
I should probably clarify that when I said, “sock away,” I meant savings through some sort of private investment like stocks, bonds or mutual funds, not hiding it under my mattress.
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### Author:  [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)
#### Post date: [October 11, 2013, 5:54pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/8 "2013-10-11T17:54:11Z")
> [@NeonMadman](#):
>
> I haven’t done the math on this, but I have a sneaking suspicion that if I had managed to sock away 15.3% of every dollar I’ve earned since I started working in 1968 (which is my SS contribution plus my employers’), I’d have enough of a nest egg to have a much nicer income in retirement than SS is likely to provide,
Yes, that’s likely for you (I’m assuming you have at least a middle class income).
But it completely misses the point of social security, which is a social _insurance_ plan rather than an investment plan. As noted in many, many other threads on the topic, you don’t expect a great ROI on your auto insurance, either.
> [@NeonMadman](#):
>
> Basically, it’s just another tax that the government can use as it sees fit.
And no, this is not strictly true, though Congress does borrow from it. The difference is that the money must be paid back and a strict accounting is maintained.
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### Author:  [@svd678](https://boards.straightdope.com/u/svd678)
#### Post date: [October 11, 2013, 5:58pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/9 "2013-10-11T17:58:37Z")
Neon: …unless, of course, your investments pay 0%, as some of mine have, the last 4 years.
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### Author:  [@doreen](https://boards.straightdope.com/u/doreen)
#### Post date: [October 11, 2013, 6:01pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/10 "2013-10-11T18:01:08Z")
> [@NeonMadman](#):
>
> I haven’t done the math on this, but I have a sneaking suspicion that if I had managed to sock away 15.3% of every dollar I’ve earned since I started working in 1968 (which is my SS contribution plus my employers’), I’d have enough of a nest egg to have a much nicer income in retirement than SS is likely to provide, and I wouldn’t have to rely on the whim of the government as to whether it would honor its promise to pay. Also, I could pass the nest egg on to my heirs when I die. Social Security strikes me as something we would have been better off without as a nation. Basically, it’s just another tax that the government can use as it sees fit.
Yes, you might have , just like I’d have been better off socking away my homeowner’s insurance premium if I never make a claim. Social Security is at least as much an insurance plan as it is a retirement plan - and the family with young children that with an income earner who becomes disabled or dies at 30 wouldn’t have been better off socking away that 15.3% . And my non-contributing aunt who collected SS as a spouse for about 30 years after her husband’s death wouldn’t have been better off if he had socked away that 15.3%. In order to pay more than the contributons in those situations , others must get back less than they contributed just like any other insurance.
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### Author:  [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)
#### Post date: [October 11, 2013, 6:03pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/11 "2013-10-11T18:03:45Z")
As much as I’d like to point out flaws in **NeonMadman** ’s argument, I hope we can keep this GQ and not turn it into a debate. **Ludovic** ’s and **Exapno Mapcase** ’s posts were helpful.
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### Author:  [@jasg](https://boards.straightdope.com/u/jasg)
#### Post date: [October 11, 2013, 6:25pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/12 "2013-10-11T18:25:19Z")
I am in the “SS is insurance, not a retirement investment” camp, so I won’t argue that point.
I did take a look at my annual SS Statement that most people should be getting. It shows me the total taxes I paid and the total paid by my employers. (The tax rate ranged from a combined rate of 6% to 12.4% over my working career - not 15.3%.)
I don’t know how typical I am, but I paid into SS for 47 years, stopping at age 60. Of that time, 10 years were part time or military. Of the remaining 37 years, I hit the salary cap for the last 24 years. This means that on an annual basis, I will get back less of my contributions than those who do not hit the cap.
If I had taken SS at normal retirement age of 66, I would start collecting more than I paid in after 8 years and 2 months of benefits - without accounting for COL increases.
Looking at my family, I am likely to live much longer than age 74 - so I will collect much more than paid in taxes individually and by my employers.
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### Author:  [@samclem](https://boards.straightdope.com/u/samclem)
#### Post date: [October 11, 2013, 6:29pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/13 "2013-10-11T18:29:02Z")
**MODERATOR NOTE**
> [@NeonMadman](#):
>
> I haven’t done the math on this, but I have a sneaking suspicion that if I had managed to sock away 15.3% of every dollar I’ve earned since I started working in 1968 (which is my SS contribution plus my employers’), I’d have enough of a nest egg to have a much nicer income in retirement than SS is likely to provide, and I wouldn’t have to rely on the whim of the government as to whether it would honor its promise to pay. Also, I could pass the nest egg on to my heirs when I die. Social Security strikes me as something we would have been better off without as a nation. Basically, it’s just another tax that the government can use as it sees fit.
**Neon**. Let’s try to keep opinion out of the thread. And political discourse.
No warning issued.
**samclem** , moderator
---
### Author:  [@barbitu8](https://boards.straightdope.com/u/barbitu8)
#### Post date: [October 11, 2013, 9:30pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/14 "2013-10-11T21:30:00Z")
> [@jasg](#):
>
> I am in the “SS is insurance, not a retirement investment” camp, so I won’t argue that point.
>
> I did take a look at my annual SS Statement that most people should be getting. It shows me the total taxes I paid and the total paid by my employers. (The tax rate ranged from a combined rate of 6% to 12.4% over my working career - not 15.3%.)
>
> I don’t know how typical I am, but I paid into SS for 47 years, stopping at age 60. Of that time, 10 years were part time or military. Of the remaining 37 years, I hit the salary cap for the last 24 years. This means that on an annual basis, I will get back less of my contributions than those who do not hit the cap.
>
> If I had taken SS at normal retirement age of 66, I would start collecting more than I paid in after 8 years and 2 months of benefits - without accounting for COL increases.
>
> Looking at my family, I am likely to live much longer than age 74 - so I will collect much more than paid in taxes individually and by my employers.
FICA taxes don’t start until one is 21. So if you stopped at age 60, how could you have paid in for 47 years? I did the math a long time ago (I’m 76 now) as to whether it would be better to receive early old-age benefits or wait until full retirement age, and came out with the same results: wait if you expect to live to at least 74.
Other factors are involved as to the benefits, as others have pointed out: Auxiliary benefits may be available to spouse, children, even parents in certain cases. In addition, Medicare is not available unless you were fully insured. In my case, I had several operations for which Medicare paid the 80% (and my supplemental insurance the other 20%) after the annual deductions. Of course I’ve had to pay the moly coverage (about $100). For some who need care after hospitalization, either at home or in a skilled nursing facility, that adds up to a lot of money. If you get Medicare B, which most do, this is another moly expense, but that covers durable medical equipment, physicians, etc.
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### Author:  [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)
#### Post date: [October 11, 2013, 10:07pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/15 "2013-10-11T22:07:52Z")
Think of it this way. Social security rises with wages. So mostly speaking people contribute to social security at a lower wage rate than they receive income. Those who live longest benefit most.
So why do people not recognize this? Many ignore the fact that they their FICA deduction contains [disability insurance](https://en.wikipedia.org/wiki/Social_Security_Disability_Insurance) as well. So yeah, if you never lose a limb, etc. you might put in more than you take out. But you need to factor in the protection against physical disaster that social security gives you.
As a savings vehicle, social security has a lot features. Benefits are correlated with personal misfortune and only weakly correlated with the stock market. They are also correlated with longevity. It’s an excellent adjunct to most retirement plans.
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### Author:  [@Ludovic](https://boards.straightdope.com/u/Ludovic)
#### Post date: [October 11, 2013, 10:26pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/16 "2013-10-11T22:26:26Z")
Since this is turning into a GD anyway, I may as well throw in my thoughts:
> [@Measure\_for\_Measure](#):
>
> Benefits are correlated with personal misfortune and only weakly correlated with the stock market. They are also correlated with longevity. It’s an excellent adjunct to most retirement plans.
This is its biggest benefit, combined with the subsidization of lower incomes. If you would have been able to put the money in the stock market in the 80s and 90s, you would have blown away SS (and even matched SS even if you were at a low income!)
Other decades, not so much. We as a society have decided that we do not want anyone to starve or freeze to death when they are too old to work, even when the economy takes a downturn. SS accomplishes this well.
It also subsidizes the income of many who do not technically need it especially if they would have been able to invest it elsewhere.
It isn’t _that_ big a deal what happened to the SS taxes above that needed to make sure everyone survives in old age. It’s important _now_, because I have paid more than 6 figures into the fund and do not think it equitable if I should receive much less than the baby boomers when I retire.
(As a hijack to the hijack, I also don’t want SS to be privatized because that’s just a giveaway to big investment firms. Either give me back most of my money and reduce my taxes, or keep it as is. I can invest it on my own without a handful of investment firms locking in huge management fees off the top much like Debit card banks do with welfare.)
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### Author:  [@doreen](https://boards.straightdope.com/u/doreen)
#### Post date: [October 11, 2013, 10:37pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/17 "2013-10-11T22:37:40Z")
nm
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### Author:  [@doreen](https://boards.straightdope.com/u/doreen)
#### Post date: [October 11, 2013, 10:41pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/18 "2013-10-11T22:41:44Z")
> [@barbitu8](#):
>
> FICA taxes don’t start until one is 21. So if you stopped at age 60, how could you have paid in for 47 years? I did the math a long time ago (I’m 76 now) as to whether it would be better to receive early old-age benefits or wait until full retirement age, and came out with the same results: wait if you expect to live to at least 74.
As far as I remember, FICA starts whenever you start working on the books- which in my case was at 12 or 13 delivering circulars.I’m absolutely certain I was paying FICA (and having income tax withheld) when I was 15 and working in fast food restaurants. If I stop paying in at 60, it will be 45-48 years that I’ve paid in. ( **jasg** did say 10 years were part time or military)
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### Author:  [@barbitu8](https://boards.straightdope.com/u/barbitu8)
#### Post date: [October 11, 2013, 11:20pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/19 "2013-10-11T23:20:55Z")
> [@doreen](#):
>
> As far as I remember, FICA starts whenever you start working on the books- which in my case was at 12 or 13 delivering circulars.I’m absolutely certain I was paying FICA (and having income tax withheld) when I was 15 and working in fast food restaurants. If I stop paying in at 60, it will be 45-48 years that I’ve paid in. ( **jasg** did say 10 years were part time or military)
You are right. I misspoke, but those taxes (before age 21) do not factor in to your PIA.
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### Author:  [@NeonMadman](https://boards.straightdope.com/u/NeonMadman)
#### Post date: [October 11, 2013, 11:24pm UTC](https://boards.straightdope.com/t/social-security-input-vs-output/670981/20 "2013-10-11T23:24:11Z")
> [@Great\_Antibob](#):
>
> Yes, that’s likely for you (I’m assuming you have at least a middle class income).
>
> But it completely misses the point of social security, which is a social _insurance_ plan rather than an investment plan. As noted in many, many other threads on the topic, you don’t expect a great ROI on your auto insurance, either.
And that would be great, if participation in SS were voluntary. By forcing me to participate in SS, the government has taken money that could have produced a ROI for me, and put it into what is essentially a Ponzi scheme - current contributors are being used to pay off earlier contributors. If a private business ran like SS, the principals would be in jail.
It also seems inconsistent to me to call it insurance - insurance is taken against something that may or may not happen. My car insurance is issued in case I have an accident. Medical insurance is something I have in case I get sick. Anyone who lives long enough (i.e., doesn’t tragically experience an early death) will certainly reach retirement age. Therefore SS seems much more akin to a pension than an insurance policy, from where I sit.
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