Socially Insecure

Paul Volcker was quoted, in this morning’s Bloomberg, as saying that “Social Security is the bedrock of any retirement policy in this country …”.  Such a statement hardly comes as a surprise, considering Mr. Volcker’s position as chairman of the President’s Economic Recover Advisory Board.  Nevertheless, to anyone who has studied the empirical evidence available, a persistent faith in any program as broken as Social Security is far more blind and zealous than any religious dogma.  To illustrate,  the current Social security tax rate is somewhere around 6.2% for all Americans earning under $97,000 (Which means almost 90% of all americans).  What most people don’t know is that employer’s must match their employee’s contribution.  At an annual income of $50,000, $6,200 goes to Social Security–over $500 per month.  Now, assuming that one works from age 22 (the average age of college graduation) until 65, we’re looking at a total contribution of $266,600–assuming income never increases.  Even if our imaginary earner were to live until 100, and assuming that her money was not invested, but rather tucked away in a vault, her monthly return, evenly distributed over the course of her life should be somewhere in the ballpark of $2,666 without taking inflation into account.  But alas, under the current system, her return would be much, much lower (approximately $1,083).  Why?  Because nothing in life is free.  Someone must pay the bureaucracy.  And  we all know that bureaucracies don’t come cheap.