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Demographics, Social Security & Politics

20 October 2010 12 Comments

I heard some interesting insight into social security today that I’d pass along to the readers here.  First, let’s start with demographics – demographics are crucial to anything finance or political.  When it comes to life expectancy, the demographics show the following with regards to men and women, both black and white:

  1. On average, black men die youngest
  2. Then white men
  3. Then black women
  4. Then white women

So, on average, white women take the most social security income and black men take the least (out of these groups).  As such, black men that pay into social security their entire lives don’t get as much out of it as white women who pay into it during their lives. Since, you can’t pass on any excess social security income that you’ve contributed yet die before collecting, the money is lost.  Therefore, to some degree, there is a transfer of wealth from black men to white women.  Again, to some degree.

Ok, now social security has some problems.  It’s essentially a bunch of IOUs since the money that is paid in social security taxes is not put in a safe to be distributed as social security payments.  No, it is distributed in whatever Federal spending is currently going on.  The problem is that people are living longer, and social security won’t be able to cover the payments in the future with the anticipated revenues.  The numbers are very big.

Addressing this issue isn’t political, it’s mathematics.  Unfortunately, our politicians only make it about politics and any attempt to reform it is usually met with accusations that you want to kill social security and you hate old people or something.  More on this in a minute.

One of the more common sense oriented plans to address some of these issues is Congressman Paul Ryan’s roadmap.  You can read about the plan here.  His bullet points for social security reform are as follows:

  • Preserves the existing Social Security program for those 55 or older.
  • Offers workers under 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees. Includes a property right so they can pass on these assets to their heirs, and a guarantee that individuals will not lose a dollar they contribute to their accounts, even after inflation.
  • Makes the program permanently solvent – according to the Congressional Budget Office [CBO] – by combining a more realistic measure of growth in Social Security’s initial benefits, with an eventual modernization of the retirement age.

Sounds pretty good right? So the part that I want to comment on is bullet #2.  Americans under the age of 55 have the option – again, the OPTION – to put a third of their social security taxes into a personal, private account.  Now, the best part of this of course, is that this chunk of your social security is your own asset.

Because it is yours, you can pass it down to heirs if you die without collecting/spending it.  Who wouldn’t want that?

Well, the criticism of course is that the opponents to such a plan would point to recent stock market events and say “Imagine if social security were privated.  Everyone would have lost everything!!”  Of course, this is just dumb, but even so, again, Ryan is proposing people 1) voluntarily agree to this and 2) it is only a small chunk of the overall social security.

So, not surprisingly, the Democrats are mostly against this plan.  Why?  Well, probably because it’s affiliated with the Republicans.

So, back to the original point.  You could make the argument that the biggest beneficiaries of this plan would be black men, since compared to women and white people, they leave the most “on the table” on average by dying before collecting social security money.  These black men could pass this money onto their families.  Of course, as most people know, the black population votes overwhelmingly for Democrats each election in America – Democrats that oppose such a measure.

Now obviously black people vote Democrat for a number of reasons, but I would be curious to see how many of them have had this explained to them and to see how many would be in favor of such a measure being implemented into social security?


  • TaJ said:

    Guaranteed principal and increase indexed to a minimum of inflation… sounds like a proposal for those personal accounts to be automatically invested in TIPS… 🙂

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  • Security said:

    Most social security systems in the world give money to people who are people who are retired, intergenerational transfer.For reasons entirely political,not economic,we have in this country,which transfers resources from young and productive old and retired.

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  • darla_serrano said:

    Some very interesting points. I think Social Security is such a hot button issue with people and it's a shame that it has become bogged down in political wrangling. The realities of it are simple mathematics… there isn't enough money! As Margaret Thatcher once said "the problem with socialism is that sooner or later you run out of other people's money" and I'm afraid that is where we are in history. We're broke and changes are going to have to be made. I think Paul Ryan's plan has some very good merits and is a great starting point to begin the conversation. I think anything that brings property rights and personal control back to the people is a good thing. I can run my life much much better than some bureaucrat thousands of miles away! Great post.

  • TaJ said:

    It's not so much that we can't raise the money, it's that we don't want to; a slightly different issue.

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  • Major Bradley said:

    1) Social Security was initially, and should be again, an INSURANCE program ONLY for retirees that truly need it. It is NOT an entitlement. Payments should be NEEDS based. (And don't think for a minute that all workers would not be paying for these indigent retirees anyway – through other social and health care programs – unless you would be satisfied to see them starve.)
    2) Congress should keep it's hands off the Social Security fund, and reimburse it for the money TAKEN in the past.
    3) A decent plan as far as it goes.

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  • Sandy Dentist said:

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  • Juan Rodriguez said:

    Money taken from Social Security should first be reimbursed by the government with interest. Then revisit the program for solutions to make it work.

    I like the partial investing idea but It should start way below the age of 55 to reap better benefits.