TAKE ACTION NOW!

Demand to Get Out of Social Security

SPONSOR:

Bastiat Capital

TARGET:

The White House and Congress

SIGNATURES:

1124


THE EXPLANATION

Every month millions of young people pour their hard-earned wages into the Social Security Administration's bottomless pit. From the outset, 7.65% of their wages are diverted to what can best be described as a lost cause. On top of that, employers match their 7.65% contribution, which means the government surreptitiously takes 15.3% of their wages on the pretext that the benevolent hand of the state will take care of them in their old age. This might have been the case fifty years ago, but these promised benefits have eroded through the years, so much so that the Administration admits that by 2032, their so-called Trust Fund will run out of money.

It is easy to predict that soon the ruling class in Washington will introduce a means test, which will disqualify millions of young people from ever getting any benefits from the Social Security Administration when they retire. As always, the ruling class will start small. They will only exclude or disqualify retirees with, say, a net worth of $5 million. The media will play its part in convincing us that some drastic measures are required to ensure the solvency of the Trust Fund and allow for the truly needy to live in relative comfort. Then, in twenty year's time, the means test will apply to those with a net worth of, say, $1 million. Politicians have been talking for years about reforming Social Security. It will never happen. This petition bypasses the ruling class and places the issue into the hands of young people. These young people are calling for A CHOICE TO OPT OUT, AND INSTEAD TO CONTRIBUTE THEIR SOCIAL SECURITY CONTRIBUTIONS INTO AN S&P INDEX FUND (ETF). - See analysis below.

We can also guarantee that five years from now the contribution rate will no longer be 7.65%, more like 8.65%.

The unpalatable truth that young people need to face today is that on top of the, say, 9% to 15% that they pay in Federal taxes (federal tax liability divided by gross wages), they are also required to cough up another 15% to a retirement program that is on the brink of insolvency. Their average tax rate, all federal taxes and contributions, already places them in the 25% plus tax bracket, which is outrageous.

Politicians have been talking for years about reforming Social Security. It will never happen. This petition bypasses the ruling class and places the issue into the hands of young people. These young people are calling for A CHOICE TO OPT OUT, AND INSTEAD TO CONTRIBUTE THEIR SOCIAL SECURITY CONTRIBUTIONS INTO AN S&P INDEX FUND (ETF).

The only hope they have of salvaging the bad hand they have been dealt by the ruling class is to initiate a protest movement and demand a choice to opt out. By signing this petition, awareness of their cause will grow. Once the media takes notice, growth will become exponential.

Regardless of age, please sign the petition if you have a vested interest. Do it for your children or your grandchildren, or because you believe in freedom of choice and reject socialist-orientated solutions. Margaret Thatcher famously argued that socialists eventually run out of other people's money. The Social Security Administration (SSA) is on record that this day is not far off: "The law governing benefit amounts may change because, by 2032, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits." (As per SSA letter accompanying "Your Social Security Statement.")

Mid-term elections will be upon us in 2018. No politician will dare run on a platform other than one that includes an option for young people to leave the Social Security system if they so choose. (If it is such a great program, nobody will opt out. Not so?) The only requirement for this movement to succeed is for millions of young people to sign this petition.

Sign the petition and spread the word.

FRIDAY • SEPTEMBER 9, 2016 • by Albert Meyer

What if taxpayers had a choice between the state-sponsored retirement system (Social Security), or a retirement fund managed by the private sector?

Let us assume that a private sector fund invests all contributions into the S&P 500 index, and that the period under review extends over 40 years, from 1975 to 2015.

Over the past 40 years, measured to the end of August 2015, returns on the S&P 500 compounded at 8.13% per year. US GDP grew at 6.09% per year over the same period.Social Security taxes are calculated on what is called “taxable earnings,” which were $14,100 in 1975. These were adjusted every year to $118,500 by 2015, i.e., at a rate of 5.47% per year. During this period, the government increased the tax rate nine times. The rate was temporarily cut by 2 percentage points in 2011 and 2012. There is talk of increasing the tax rate yet again.

Assume an individual earned a constant 80% of taxable earnings from 1975 to 2015, that is, $11,280 in 1975 and $94,800 by 2015. Assume the individual chose to invest his social security taxes (employee and employer’s contribution) in an S&P 500 index fund.

The $1,320 in social security taxes collected in year one would have grown to $30,213 by year 40. The social security taxes collected in year two ($1,432) would have grown to $26,127.

Added together, if all the individual and employer’s social security taxes were invested in the S&P 500 over the forty-year period from 1975 to 2015, the resulting portfolio would be worth $963,237 by 2015. Total contributions would have amounted to $311,062.

Currently, the dividend rate on the S&P 500 is 1.91%. The $963,237 portfolio would yield $18,398 in dividend income. From 2015 to 2016, the portfolio would have increased by another $125,582, bringing the total value of the portfolio to $1.088 million, and generating $20,796 in dividend income.

The maximum monthly Social Security benefit payment for a person retiring in 2016 at full retirement age of 66 is $2,639, but this amount is only payable to those who had the maximum taxable earnings for at least 35 working years. In our example, our hypothetical individual only earned 80% of the maximum taxable earnings. The estimated average monthly benefit for “all retired workers” in 2016 is $1,341 (Investopedia).

To purchase an annuity of $1,341 per month, increasing at a rate of +3.23% per year, requires a payment of approximately $300,000. After 20 years, the payment increases at a rate of 3.42% per year. With a portfolio value of $1.088 million minus the cost ($300,000) of an annuity paying $1,341 per month, the average “retired worker” has been short-changed by about $785,000. A common refrain in the media is that the average American has not saved enough for retirement. However, it is the inevitable outcome when taxpayers are coerced into a government pension fund that leaves them woefully short of a sizable nest egg after 40 years of labor.

An S&P 500 index fund would have been a much better option back in 1975. Even if the differences between the returns on the S&P 500 and what the government-run retirement fund promises to pay are not that stark, non-monetary considerations supersede all else.

Cash contributed to a fund, independent of the US Treasury, would have been legally owned by the individual. This means that in the event of death, the investments in the private sector fund would form part of the deceased’s estate.

In addition, an individual’s decision to time his retirement would not depend on the government determining the size of his social security stipend at the age of 66 or 70.

There is serious talk in Washington to introduce a means test. In other words, any responsible taxpayer who has saved for retirement and forgone overseas trips, boats, imported SUVs, and other luxuries, faces a rude awakening. The size of an individual’s “excessive” net worth could cut his social security income in half, or even exclude the individual altogether from collecting on social security.

Why would anyone argue that Washington is better equipped to provide young people with a retirement plan?

A private sector plan would be subject to laws that regulate pension plans. The promised future benefits would have to be covered by sufficient plan assets (investments) to guarantee the promised annuities. The government “pension plan” offers no such guarantees. Government promises are covered by Washington’s ability to print money. Washington also has the ability to change the rules along the way, whereas a private fund will fulfill its commitments to the letter.

Forget about reforming Social Security and all the political bickering that would accompany such a process. Just offer young people a choice to opt out. If Social Security were such an irresistible deal, nobody would opt out, right? The ability to opt out could be tied to a condition that the taxpayer must contribute a certain percentage of pre-tax wages to a privately run retirement fund that cannot be accessed until the age of 65, and then only in annual increments, or instead to purchase a lifetime annuity.

The difficulty lies not so much in developing new ideas as in escaping from old ones. John Maynard Keynes