Social security should have been a means-tested welfare program starting in 1984 when the last major reform (tax increase) was made. The government has no business trying to provide retirement income especially using a generational Ponzi scheme approach. Big socialism is doomed to failure.
The means testing could have been structured so that current retirees received at least their contributions with some modest interest. The greatest generation has ripped off the rest of us by insisting that they earned their social security benefits. I will use my father as an example. He retired in 1986 at age 62. He has received Social Security benefits for 21 years. His combined payroll taxes were no more than $37,000, probably no more than $30,000. Yet he has received tax free benefits of more than $200,000. My mother has received spousal benefits of more than $130,000. Yet my parents think that they earned their benefits. Their benefits have come out of our retirement savings. Most people pay more in FICA taxes than in their 401K plans. These taxes have been directly diverted from most boomers retirement savings.
If your father’s $37,000 plus his employer’s matching $37,000 had been invested as it was paid into all through 40 years of work, it would have built to a tidy sum. Maybe more than enough to have paid what he and your mother have drawn from it.
You got me curious so I WAG’d some numbers into Excel. Beginning with $70/month in 1946 and using average wage inflation of 3.6%, 40 years of SS taxes would have totaled $74K. Your father + employer would have been paying in $300/mo total toward the end. Invested at 7% from the beginning as a 401k would have done, that would have grown to $300K. That would have provided $1600/mo income stream for 25 years — even allowing for 3% COLA so the last year would be at $3300/mo ! The total of all payouts would be $730K over 25 years.
If your $37,000 figure was for the total of employee+employer, the numbers above would just be halved and your parents would still not have exceeded what an investment plan would have provided.
Of course, that was not done. There was no money invested, it was simply used to pay out money to people as they retired, same Ponzi scheme as now.
But I’m not sure we should blame our fathers’ generation. It is actually the people that started collecting SS benefits without having contributed for 30 or 40 years. Our parents’ parents, in other words, that started collecting benefits in the 50’s after paying in for a small portion of their working lives.