There’s been a lot of talk over the last several years and most recently by a Presidential candidates about whether Social Security is nothing but a Ponzi scheme. Well folks, Social Security is not a Ponzi scheme. It may feel like one. But it’s not.
A Ponzi scheme is investment fraud knowingly perpetrated so that early investors are paid off with money from later investors. This is done specifically to encourage more investors to take part. (Remember: If it’s too good to be true, it probably is.) Of course, the scheme’s perpetrators keep a lot of the money for themselves. Social Security lacks both the fraudulent intent and profit-making motive of a Ponzi scheme.
How was Social Security Supposed to be Funded?
Designed as a pay as you go system, the system was never designed with the idea of creating an individual savings account for each working adult. Social Security is a pool of money held in trust that pays benefits to our retired workers that have met set eligibility requirements. So, although the payment formula allows for payments based upon contribution levels, we are not necessarily supposed to be getting back the same dollar amount that we paid into Social Security. Further, the working public and their employers are supposed to be carrying the tax burden for the country’s qualified Social Security recipients. Like it or not, the Social Security system is as designed.
Jane Nowak is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles quoted and published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.
Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC