Posted on 18 October 2012
By Mark Miller
Is Social Security a good deal? Many Americans worry that they will put more money into the system via payroll taxes during their working years than they will ever get back in benefits – and their concerns help fuel the ongoing push by Republicans to transform Social Security into a privatized system of personal accounts.
Mitt Romney has supported privatization in the past (see his book, “No Apology”), and running mate Paul Ryan argued for it as recently as last week’s vice presidential debate: “Let younger Americans have a voluntary choice of making their money work faster for them within the Social Security system.”
Could workers make their money grow more quickly with personal accounts? The actuaries at the Social Security Administration (SSA) ran an analysis recently that simulated real (after inflation) annual rates of return on payroll tax contributions for beneficiaries who were born between 1920 and 2004.
It showed that some workers might beat Social Security’s returns in some years if they took risks in the stock market. But over a lifetime, Social Security’s consistent, risk-free and inflation-adjusted returns would be very tough to beat.