In Mr. Smith's article on May 12 he was inaccurate in his statement that Social Security is your money being paid back. Social Security is a safety net that provides a minimum amount of money for those who reach the age of 62 for reduced payment and 67 for full benefit. The Social Security administration takes money from the employer and employee at the rate of 6.5 percent for each.
This money is a tax placed upon everyone who earns money. When money is taken by a tax the ownership of the money belongs to the government. Social Security is not a savings account. This was adjudicated in the Supreme Court Flemming v Nestor. The simplest way to explain the judgment is that you don't own the money.
The money that we have entrusted to the government pays for the generation that came before us. In Social Security Publication No. 05-10024 Social Security is explained as a transfer of money from one generation to another. The money that was taken by tax paid for the benefit our parents and grandparent. Any excess was placed in treasury notes until last year when we had to cash in treasury notes to pay beneficiaries. This shortage was caused by a slow economy and a reduction in the amount of FICA tax that was taken out of peoples' paychecks.
The government to be able to continue to pay Social Security recipients had to take the treasury notes from the Social Security lock box and cash them in. Because of the huge deficits more money was printed with QE-3 and more treasury notes were issued to cover these treasury notes that were cashed in. This type of financing was explained to me as taking one credit card to pay another.
When the generation that is now working and paying into the Social Security system retires they will expect to receive their benefits. The promise that the government has made must be kept because we have traded our money for this promise. It is only a promise which can be changed at any time by our government.
If you are depending on Social Security for your only source of retirement expect to live in poverty. Social Security is a safety net needed by most people but was never intended to be the full retirement. People need to wake up to the fact and invest or save so that they will not be dependent on the safety net called Social Security.