We like to think of Social Security as an annuity, because we “paid into it.”  (Indeed, I paid the maximum amount into it for many years.)  But, just try to buy such an annuity from an insurance company, and you will find it is not available.  They do not exist!  Any company selling annuities like Social Security would promptly go bankrupt.

Yes, there is a Social Security trust fund, but it is invested in U.S. Treasury bonds, which pay almost nothing in interest income and assumes repayment of those bonds.  And, who is going to repay those bonds?  My grandson is named Max, and he needs to be concerned.

From a the standpoint of an economist, it is more appropriate to think of Social Security as a transfer program from America’s kids & grand-kids.

In 1970, there were 3.7 workers supporting each Social Security recipient.  Ignoring inflation and benefit level changes, that means each paid the old-timer $8,108 every year.  By 1990, there were only 3.4 workers, each of whom transferred $8,824 every year to the “Greatest Generation.”  By 2010, there were only 2.9 workers, each of whom transferred $10,345 to somebody’s grandparents every year.  It is estimated there will only be 2.2 workers by 2030, each of whom will be paying $13,636 to somebody like me every year.

The increase from $8,108 in 1970 to $13,636 in 2030 is 68%.

And, the really scary part is that the time bomb of Social Security is minor compared to the time bomb of Medicare/Medicaid..