Social Security: A Student’s Perspective
Amy Davis — June 15, 2005
As a young college student about to graduate and enter that big, mean, financial quagmire of a “real world” on my own, I have started to pay more attention to Social Security. I wanted to know exactly where this money went that was taken out of my paycheck, and how (if at all) I benefited by its removal.
Begun when President Franklin Delano Roosevelt signed the Social Security Act in 1935, Social Security has since become something most Americans take for granted?at least until recent worries about the future exhaustion of the Social Security Trust Fund. Social Security was just a matter of fact for the past several decades, and it seemed to be a good idea?the sort of thing that safeguards against a penniless old age. Like many “New Deal” programs in the Depression Era, however, Social Security apparently was not made to last.
The idea behind Social Security is that the government takes a little bit of money (around 6.2% if you’re not self-employed) out of our paychecks and in return, pays us a nice little stipend when we retire and are no longer able to work to provide for ourselves. The problem is that the stipend is not comparable to the amount taken out of our paychecks. It just isn’t a very good financial deal. An able-bodied retired worker’s average Social Security benefit is $955 per month. Consider for a second what 6.2% of your income actually equals. Let’s say I make $25,000 per year when I graduate from LeTourneau University and begin a career?a modest paycheck. 6.2% of $25,000 is $1,550. Imagine, rather than pay that $1,550 to Social Security, I take it out of my paycheck and invest it, increasing it every year by an additional 6.2% of my income. If I don’t touch these investments until retirement you can see where the trend goes. I would likely be quite well off in my old age, able to live on significantly more than $955 per month.
Where does the discrepancy lie? It is in the framework of Social Security, in how Social Security is financed. The 6.2% removed from my paycheck does not go into an account for my retirement; rather it funds the retirement benefits for people already living in retirement. Then, when I retire, my benefits will come from the payments of people in the workforce at that time. I don’t like that idea at all. I want to pay for my own retirement, not for somebody else’s. And I certainly don’t want to have to
blindly hope that there will be somebody else able to pay for my retirement. Plus, maybe I want to have some say in whether or not 6.2% of my income is taken away. Isn’t that part of being a responsible adult? Maybe I would rather take responsibility for my own retirement, and graciously decline the offer of Social Security as a retirement fund babysitter. Maybe I think I could better steward that extra 6.2% for myself than Social Security could for me. To be honest, I guess I’m just stubborn enough to dislike the idea of anyone else being involved in how I manage my money.
There is another, more serious problem with this system. The fund Social Security brings in from the workforce does not always balance out with funds that go out to people in their Social Security checks. In fact, in their 2005 Annual Report to Congress, the Social Security Trustees projected that in 2017, the money brought in to Social Security will be less than the money expended on program costs. So the amount paid in by the workforce will no longer equal the amount paid out in benefits?a scary thought. By 2041 (the Trustees project) the Social Security Trust Fund will be exhausted.
What does that mean for me, as a college kid just starting out in life? That the 6.2% taken out of my paycheck without my consent will go into a dying institution that will be bankrupt by the time I retire and can make use of it? Doesn’t sound like a very smart financial plan. This is why Social Security, flawed in design, has already outlived its usefulness. It should be ended as a system before more money is taken away from hard-working citizens, with the promise to return it in their future, with the reality that they will never see it again.
One of my biggest concerns with all of this is that somehow, in spite of the very great danger I see looming over Social Security; it is not receiving the importance in the media that I think it deserves. In reading several newspapers a day, I find that Social Security as an issue is rarely, if ever, addressed on the front page. Why is it that Michael Jackson’s trial receives so much more coverage than Social Security, which directly affects all Americans and has become a sort of ticking time-bomb? Shouldn’t the media be trying to educate the public about the very real danger in the future of Social Security, and possibly give more than a passing glance at Washington’s current discussions of the topic?
Category: Personal Finance