My take is that Rex B is partly correct. In truth, Social Security is actually an insurance program funded by payroll taxes. It isn’t strictly a tax because the FICA withholdings are premiums for a “social insurance” meant to cover, among other things, loss of income from the worker’s retirement, loss of income from disability, worker survivor benefits, etc.
In that sense, it is--and was never intended to be--a trust fund or retirement account for individual workers, and what you and I pay into it are insurance premiums, not an investment instrument. So there is no correlation between your Social Security payment and how much you and your employer actually paid over the course of your working in the form of FICA insurance premiums. Like any insurance, it was designed to spread the risk out among all the insured. So, for example, a worker who becomes disabled in his 30s could receive a much larger cumulative payout over his lifetime than a worker who retires at 65 and lives to 80.
Social Security law is specified in
Title 42, Chapter 7 of the U.S. Code. You’ll probably be greatly surprised to see what all benefits from your FICA withholdings.
Fair or not, ultimately Constitutional or not, for us Baby Boomers and our elders, it’s become a huge mess. Money obtained via FICA taxes have been spent at incredible rates in the past years. By dollars piad out, it's the largest government program in the world...
and the Boomers are just now starting to reach fully-eligible retirement age. None of them have started taking any appreciable amount yet in retirement payments.
Many of us in our 50s and beyond were counting on some level of retirement insurance to help supplement decreasing earning potential. There were no 401(k) options when we started our careers (and when IRAs first appeared in 1974, the maximum contribution was $1,500, so that didn't add up very fast even if we were prescient and new what would come), and slowly but surely over the decades private companies have almost totally eliminated pension plans. We don't have time to make up for retirement savings we missed out on during our 20s and 30s. But what's being done with the FICA money makes that supplemental income source an uncertain future.
Too, the whole "Federal Old-Age and Survivors Insurance Trust Fund" looks like an accounting sheme, with not much intent to actually grow the collected monies. Each year, any revenue that exceeds expenditures (including operation of the Fund) are automatically invested in U.S. Treasury Bonds. So in essence, the Fund is doing little more than financing the general purpose federal deficit spending and not really earning any meaningful interest.
However, as I read it, yes, Social Security is an entitlement, even the main part of the program called OASDI (Old Age, Survivors, and Disability Insurance). It is an
insurance program, not an
investment or
pension program. Never has there been any guarantee in it that you will get out at least what you put in. And as a federal insurance program, the federal government can legislate changes to the laws which govern the program.
Strictly speaking, that looks like an entitlement to me. There is no warranty of pay-out. And when you consider that Social Security includes much more than the OASDI--including unemployment benefits and the State Children's Health Insurance Program--the whole concept of a retirement plan is very much diluted.
!!! I had no choice but to pay into SS starting with my first job as a 16 year old retail clerk in a department store in Harrisburg, IL some 52 years ago. I was forcd to pay into SS from then until I quit working some half century later. I earned my SS payments the hard way - working!
I could go on and on, but probably shouldn't. I'll be having my teeth cleaned in an hour or so and they always take my blood pressure first...........
