Editors’ Note: After Mitt Romney selected Paul Ryan as his running mate, debates over the future of programs like Medicare, Medicade, and Social Security intensified this election season. Sociologists and political scientists have done a great deal of research on such programs (see the recommended readings below). Here, sociologist Joel Best, already a TSP contributor, offers a more personal reflection on own experience with Social Security. We believe Best’s story, which cuts against the grain of conventional political ideologies and affiliations, provides a useful entrée into more systemic thinking on this storied, unique, and controversial program. Of course, we also love that Best got his start thinking about Social Security as a high school debater back in Minnesota.
Most of us, when we get to an age to start truly thinking about Social Security, imagine that—presumably someplace in Washington—there’s a little drawer with our name on it containing our years of contributions to Social Security. That is, when we collect Social Security, we simply get our own money back. But that’s not true. If I stay healthy, I am likely to come out way ahead; I’ll get far more out of the system than I put in.
A few weeks before I turned 66 this summer, I signed up for “full” Social Security benefits. The mail soon brought a letter officially informing me of the exact amount that I would begin receiving each month. I compared this letter with my most recent copy of Your Social Security Statement, which reported my total, lifetime Social Security contributions. Dividing my total contributions by my monthly payment, I discovered it would take me less than four years to recover every cent I’ve had withheld from my taxes.Of course, it’s a bit more complicated than that. My employers have been matching my contributions, so it will take around seven years for my monthly checks to equal the total contributions to my account. But don‘t forget that my checks will be subject to cost-of-living increases; with the government sending me ever-larger checks, I will actually will collect all the money contributed in my name even earlier than I’ve calculated. Oh, and I suppose I really ought to factor in inflation; when I started paying Social Security taxes in the 1960s, the dollars I contributed were worth more than one of today’s bucks, but my earnings rose during the course of my career (as did Social Security taxes), so I contributed a lot more in recent years than I did in those “worth-more dollars” when I was starting out. Still, overall, the value of my contributions in today’s dollars has probably been somewhat higher than my statement suggests.
Back to our calculations: I’ve spotted another factor. I haven’t retired. I am a full professor, and I am paid a very nice salary. At this point in my life, I love what I do, and so long as my health remains good, I’ll probably continue working for, say, another six or seven years. That means that I’ll continue paying Social Security taxes, and my employer will keep matching those payments. Each year, the amount paid into the system on my behalf will equal nearly half the total of the monthly checks being paid out to me. So now I suppose it might take as much as 11 years for me to get back all the money in my account.
Oh, I forgot marriage! I’m married. When my wife turns 62, she will qualify for Social Security, but her check will be based on more than the taxes she paid when she was employed. She will also receive a percentage of my Social Security payment. This won’t reduce my Social Security check; she will just start receiving additional payments that, I guess, ought to be counted against my account. So, if we take her Social Security payments into account, and if we assume I work for another seven years, now we’ve found it’ll take less than ten years before, as a couple, my wife and I have received back all the money we and our employers paid into the system. In other words, after I’m about 76, every cent we get from Social Security will be gravy. Alternatively, if I retired today, we’d hit that point before my 73rd birthday (making it, on just this metric, a smart financial decision to go ahead and retire).
Just for giggles, I visited seven websites that offer life expectancy calculators: you punch in a bunch of information about yourself, and the sites estimate how much longer you can expect to live (on average, of course). One of these websites is operated by the Social Security System; it calculates that I can expect to live to be 84. According to their own model, then, I can expect to get back roughly twice what I contributed—and that’s if I continue working. If I retire tomorrow, paying in no more Social Security taxes, the government’s own calculator weould expect to pay me about three times what I contributed. The other websites all offered forecasts that were equally or more optimistic—they project that I will check out sometime between 84 and 94.
All of these calculations are admittedly flawed: they don’t correct for inflation, and they assume that taxes and benefits won’t change, though they surely will. They rely on back-of-the-envelope figuring and online surveys. But you get the idea. Even on the low end of life expectancy predictions, we are likely to get back way, way more—two or three times more—money than we paid into the system.
Further, I have lived a comfortable life. Professors like to complain about their lot, but it is, as the saying goes, indoor work with no heavy lifting. I have earned a good salary; my jobs have come with good benefits; and I’ve been able to save. And I’ve been very lucky: my family hasn’t experienced any of the all-too-common accidents or emergencies that can destroy a middle-class family’s financial security.
Other people turning 66 this year have been less fortunate: they’ve earned lower incomes, their work may have damaged their health, their benefits haven’t been as good, they’ve been unable to save, and some have experienced crises that have made their lives much harder. Many will depend on their Social Security checks for a large share—in some cases all—of their income once they stop working. And guess what? Those people, the ones who need—really need—Social Security are going to get much smaller checks than mine, because they paid less in Social Security taxes. (It is also true that—like me—they are likely to receive more in benefits than they contributed to the system.) This worries me.
Another interesting worry crops up when you consider my portentious age. Those of us turning 66 belong to the first year of the Baby Boom. My parents married in August, 1945, just weeks after World War II ended, and I showed up 51 weeks later. There were a lot of babies born that year and in the years that followed. From this year on, a whole lot of Boomers like me will be asking Social Security to slide open that little drawer and send us our “savings.”
None of this is a big surprise. In 1963, I was a high school debater, and our competition question concerned whether Social Security should be expanded to include medical benefits (this was pre-Medicare, so we were basically debating whether the country ought to establish some sort of health care insurance for senior citizens). I wound up reading a lot about Social Security, and I can tell you that, nearly 50 years ago, people were already warning that Social Security was unstable. It was easy to tell the Baby Boom posed a big problem for the system: we have a darn good idea how many people will become eligible for Social Security in each of the coming years, and we can make pretty good estimates for the amounts people will pay in Social Security taxes and receive as benefits. In the years since, we have postponed the crisis by gradually increasing Social Security taxes, but obviously that can’t go on forever.
All of this means America needs to have a grown-up conversation about Social Security. (It also needs—even more urgently—to confront the future of Medicare, but that’s a much knottier problem.) My own Social Security situation simply illustrates the sorts of questions we ought to be asking in our post-high school debate:
- Does it make sense to pay full Social Security benefits to people who decide to postpone retirement, particularly if those people have reasonably comfortable earnings?
- Does it make sense to pay individuals Social Security benefits that will far exceed their contributions to the system, particularly if those people have reasonably comfortable financial situations (with healthy personal savings and other retirement benefits)?
- Does it make sense to pay the highest Social Security benefits to those who need them least, and the lowest benefits to those who need Social Security most?
In recent years, my students have become quite cynical about Social Security. Many suspect that they will never receive Social Security, but I think they’re wrong. There’s no reason that Social Security can’t survive, but it will only survive if we all act like grown-ups and fix the system. I am happy to suggest we start by giving folks like me less generous treatment.
Andrea Louise Campbell. 2012. “How Social Security Encourages Older Americans to Become Active Citizens.” Scholars Strategy Network. An overview of key findings relating to Social Security from her 2003 book How Policies Make Citizens.
Fay Lomax Cook, Lawrence R. Jacobs, and Dukhong Kim. 2010. “Trusting What You Know: Information, Knowledge, and Confidence in Social Security.” The Journal of Politics 72:397-412. A recent, revealing study of Gallup public opinion survey data on Social Security.
Leah Rogne et al. 2009. Social Insurance and Social Justice: Social Security, Medicare, and the Campaign Against Entitlements. An edited collection with contributions from a number of well-known progressive social scientists including Bill Domhoff, a recent TSP contributor.
Max Skidmore. 2012. “Should We Cut Social Security to Reduce the Deficit?” Scholars Strategy Network. An excellent overview of “basic facts” about the cost, funding, and future feasibility of the system.