Saturday, January 10, 2015

Unwind Social Security Or Face The Wrath Of Ida May Fuller

In a Facebook group I recently learned of and began following, Natural Rights Libertarian, I saw a post the other day the admin created that briefly told the story of Ida May Fuller, the first person to receive payouts under Social Security. Ms. Fuller worked for three years after payroll taxes had been instituted to fund SS before she retired at age 65.

Ms. Fuller's total contributions into the system, over three years, amounted to $24.75.

Her first monthly check was for $22.54. 

Uh oh.

Ms. Fuller went on to live another thirty-five years to the ripe old age of one hundred.

Oh crap.

Ultimately, Ms. Fuller ended up collecting $22, 888.92.


Now, there's absolutely no way that returns from any sort of investment could have turned such a pittance into such abundance, especially when the funds are in the hands of .gov morons. The only way this was possible is due to the true nature of SS, that it is a "pay as you go" system in which funds stolen from today's workers are paid out to workers who were stolen from yesterday. 

Sometimes this can result in a surplus of funds, say if there are more workers today than there were yesterday, retirees die before they receive back from the system an amount at least equal to what was stolen from them, etc. 

But if it's all going the other way, more retirees than workers, people living long enough to collect far more than was ever stolen from them, etc., any surplus that might exist is going to be exhausted, and in the absence of one the inherent problems with the scheme will become apparent that much faster. When there's no surplus and also not enough funds coming in to pay the full amount of what has been promised, the real fun begins.

It's funny how the first recipient of SS turned out to be an extreme "canary in a coal mine" example of the flaws built into the system from the get-go. And it's too bad that the warning wasn't heeded.

On top of that, start adding in recipients who never even contributed anything to the fund and you've thrown gasoline on the fire.

So that's why when .gov gave us working stiffs a 2% SS tax holiday during 2011 and 2012, I put all of that money aside into a retirement account. It's growing, steadily increasing the income being generated from the equities I have those funds invested in. The SS tax holiday has been over for several years now and is unlikely to ever return, so for now the account is growing only under its own steam; I am not contributing any more to it at this time.

On that note, within the thread on the Natural Rights Libertarian group that inspired this post, and what is ultimately the topic here, is this:

This is one of many proposals that are out there to officially and permanently do with SS what I did personally and temporarily. You can click the link to read the full details, but in short, it proposes that the system be split between its present state and an arrangement similar to what I've done, with individual worker choice being the deciding factor in which of the two options comes to dominate. Based on the experience of others, it's highly likely that most would join the private system, and attrition would wind down the old, dysfunctional system over time.

Something of this sort needs to happen, otherwise the millions of Ida May Fullers appearing on the horizon are going to ruin us.

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