Social Security and Opting Out

Many conservatives suggest that Social Security should be there for those who want to participate in it, but those who don’t want to participate in it should be allowed to opt out and do their own investing for their retirement. It sounds like a reasonable suggestion, but it ignores one detail.

Social Security is not just a retirement program, it is an insurance program. One type of insurance provided by Social Security are a guarantee to pay children and families some amount of money every month should their parent die. Another is to provide payment to a child for its whole life should it have some debilitating disease that does not allow it to work.

But it is a strange kind of insurance program – it only collects premiums once someone is able to earn income.

Which means…. if one were allowed to opt out of the system upon reaching that point, one will never pay for the value of the insurance received as a child. (Obviously, those children that are not able to work upon growing up would never opt out of the system.) This is the equivalent of having a home-owner’s insurance policy for which one can defer payment for twenty odd years. Then, at the end of the twenty odd years, one decides the insurance wasn’t necessary, and cancelling, while refusing to pay for the insurance policy one had up until to that point.

So… I think people should be allowed to opt out of the system. But they should be required to pay for that health insurance policy they used first.