Is Social Security a Ponzi scheme?

probably.

Current employees pay the benefits for retirees. It isn’t a Ponzi scheme, because there are no investments, or investment returns. It’s pay as you go.

I know it can look like one, because it seems like current beneficiaries are getting so much now that future beneficiaries will get nothing.

I believe that scenario is unlikely. Yes, we aren’t paying enough in right now to fund future promised benefits. But that can be fixed pretty easily. We’ll reduce benefits, or increase the burden on current employees. Most likely we’ll reduce benefits.

However, we really don’t know what will happen in the future. The assumption is that the workforce will decline and the number of retirees will balloon, leading us into a retirement system that runs in the red. Any of these assumptions could be wrong. Immigration could balloon, leading to a huge increase in workers, and more money for Social Security. Baby Boomers might all die suddenly, of cancer, leaving the system overfunded.

Personally, I think that once we have a gazillion baby boomers who are old, and needing all kinds of help just to move around, we’ll open the doors to immigrants, as they will be the only ones willing to clean our poop and piss. People who are against immigration, in my humble opinion, have their heads up their asses, and are clueless about the future. Let them lie in unrine-soaked beds, because there’s no one available to clean you up.

daloon- do you have a link?

Life is a Ponsi Scheme the pay-off is we die.

@cheeb, sorry, no. This is just from various lectures I’ve attended over the years. But I’m sure if you looked at the social security administration website, you’d find information on how it’s funded, and what the projections are for the future, and the assumptions used in making those projections.

Social Security is insurance. When it was set up the majority of workers were paying in and a much smaller number were taking out. According to the actuarial tables about half of the workers would die before 65 so they would not benefit from the taxes they and their employers would pay in. The excess contributions would be invested in govt securities, generating interest, and that would offset inflation and pay a life-long benefit for the workers who lived past 65. Remember at that time very few people made it past 70 with most diseases like cancer and diabetes not responding to treatment.

With the baby boomers becoming adults in the 60’s there was a need to increase the job pool, SocSec retirement age was dropped while the average life expectancy was going up. Even though early retirement meant a smaller benefits, most middle class workers were vested in company pensions, eligible for union pensions or at least owned their homes, were debt free and able to live on a smaller income.

So what has happened? People are living much longer and spending much more post-retirement. The money that should be paid to boomers is tied up in the out of control national debt and acturial adjustments have not been made as demographics have changed. Starting with people born in 1947 the retirement age will inch up. To generate long term liquidity we need to put money back that has been used to fund the national debt. There should be no cap on contributions. But we will never get to cut payments since we have let millions of workers’ pensions be blown off and mishandled by corps. Millions have blown their own nest eggs by taking out new mortgages in their 50’s instead of paying off their debt.

Excellent analysis, GG!

I hope it isn’t a Ponzi scheme, but if it is I am glad that I am one of the ones who are benefitting from it, while those after me may not. Even though I no longer have a mortgage, and do have a pension, the payments make a huge difference to our quality of life.

Yes yes yes yes yes yes yes.

Also, GQ. Lurve.