The Ponzi Excuse; Lawmakers Reason To Privatize Social Security

Privatize Social Security, Update 2018 – It’s Getting Worse

Lawmakers privatize social security

Some lawmakers would have you believe that social security is a massive debt program in terrible trouble. A Ponzi scheme is how many have characterized it.

A Ponzi scheme is when a person runs a fake investment company that uses new investor funds to pay old investors, instead of actual investment returns. Most or none of the money is ever invested in anything. Because of this, Ponzi schemes collapse in a short period of time.

The Ponzi scheme collapses because the money is used to finance a lavish lifestyle of the Ponzi and runs out when the Ponzi can no longer attract new money or when the investors want their money back. An example of a well-known Ponzi schemer is Bernie Madoff.

How does social security compare to a Ponzi scheme? It does not. First of all, it has not collapsed in a short period of time; in fact, it has lasted for 72 years. Unlike a Ponzi scheme, where only a small number of investors are paid what they invest until the scheme collapses, social security has paid out what employees have invested.

Social security is a low-cost benefit program that pays inflation adjusted benefits, and has not had any missed payments.

Social security takes mandatory payments from employees while most 401k accounts have voluntary participation. Unlike 401k retirement savings accounts pre-retirees cannot take loans against social security accounts. These are a few reasons that social security is more secure than a 401k account.

Another problem with 401k plans is because participation is usually optional, many employees do not understand that they will have a limited or no retirement if they do not participate in their 401k plan.

Now lawmakers are trying to politicize social security due to the aging American population, the social security trust fund will run low in coming years. This has given some politicians the excuse to privatize social security, turning billions of dollars over to Wall Street in 401k type investments. This would be far more costly than the current system and the beneficiaries of the program would get far less money at retirement.

The solution to the social security dilemma is simple. The current social security payroll tax limit is based on the employees first $106,800 in earnings, if this limit is raised just a small amount, a large part of the problem going forward will be solved by adding substantial money to the social security trust fund. There are other viable solutions as well. Putting our social security taxes in private 401k type wall street funds is not a viable solution. Find out more about saving money here.
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