What Social Security isn’t

There has always been a lot of misinformation and frank dishonesty surrounding Social Security. Here are three things that Social Security isn’t:

1. A retirement investment. Social Security is insurance. It is not meant to be your sole source of income after retirement (although for many Americans, it basically is). Social Security is not a substitute for a pension or 401k, or for personal savings. But if some calamity befalls you and you lose your retirement savings, Social Security can keep you from having to starve under a bridge. Comparisons between Social Security and, e.g., index funds are specious.

2. Broke or bankrupt. Even if the Trust Fund runs out in ca. 2033, Social Security will still pay nearly 80% of projected benefits. As long as there are workers in America, SS cannot go broke/bankrupt.

3. A Ponzi scheme. Anyone who tells you that Social Security is a Ponzi scheme understands neither Social Security nor Ponzi schemes and can safely be ignored. Here’s why:

“To begin with, Social Security isn’t an investment vehicle, which is a requirement of a Ponzi scheme. The program is more of a social investment in the well-being of our nation’s retired workers, survivors of deceased workers, and workers with long-term disabilities. Social Security was never designed to generate a profit or make its beneficiaries rich . . .

“Secondly, a Ponzi scheme specifically pays existing investors with the money collected from newer investors. Social Security fails this definition because not all of the money doled out in benefits comes from current worker.

“In 2022, 90.6% of the $1.222 trillion Social Security collected derived from the 12.4% payroll tax on earned income . . . of working Americans. The remaining 9.4% ($115 billion) can be traced back to interest income earned on Social Security’s asset reserves, as well as the taxation of benefits.

“As noted, Ponzi schemes result in their architects stealing customers’ funds. In other words, there’s always money missing once the books are delved into. A third way Social Security confirms it’s not a Ponzi scheme is by the transparency of its Trustees Reports . . .


“Despite the extremely superficial correlation of today’s workers providing a substantial percentage of the benefits existing beneficiaries are receiving, Social Security in no way meets the definition of a Ponzi Scheme.”

Social Security is not a Ponzi scheme