Is Social Security a Ponzi Scheme?


Root and branch, the Social Security system undercut social insurance. As someone who supports compulsory savings and social insurance, I am a big supporter. Social Security is an embarrassment in its current form. The system is insolvent, unfair within and across generations, and a user’s nightmare.


America is Beyond Broke

In the 2013 Trustees Report, table IVB6 shows that 33 percent of Social Security is underfunded. Its infinite horizon fiscal gap is $23 trillion – the difference between all expected future expenditures less all anticipated taxes, plus the trust fund – or 32 percent of the projected Social Security taxes in the future.


Social Security Is Inequitable Across Generations

Historically, Social Security has been run on a pay-as-you-go basis, similar to the federal government as a whole (which is 57 percent underfunded). The generational expropriation takes place when the retirees (rich, middle-class, and poor) take from the contemporary young, promising the youth that it will happen when they’re old.

Ponzi schemes are morally repugnant. A penny of the system’s unfunded liability amounting to $23 trillion is never going to be paid by current or future retirees (rich, middle class, and poor). As it stands, the burden of paying 50 percent or more of the FICA taxes throughout our children’s lifetimes will fall entirely on them.


Social Security Is Unfair Within Generations

Benefits for spouses and survivors are free under Social Security, but there are egregious inequalities. The spouses of high earners, even those who do not contribute a dime to Social Security over the course of their lifetimes, can receive hundreds of thousands of dollars in free benefits over the course of their lifetimes. In spite of that, they are not asked to contribute any more to pay for these auxiliary benefits.

If you and your ex-spouse were married for 10 years or more, you may qualify for hundreds of thousands of dollars in spousal benefits and survivor benefits. The spouses who end their marriage after nine years and 364 days receive nothing in return.


A Retirement System that No One Can Understand

The Social Security program operating manual contains tens of thousands of rules about these rules in addition to the 2,728 rules in the handbook. Almost nobody can understand their retirement finances effectively due to the complexity and opaque language of the rules. It is impossible to determine how many households are undersaving since the Social Security benefit formulas are complex.



Securities offered through Securities America, Inc., member FINRA (, a separate entity. Lee Michael Murphy is licensed with the CaliforniaDepartment of Insurance, License 0H18660. Lee Michael Murphy is an Investment Advisor Representative with Securities America Advisors, a registered investment advisor The Free Retiree, Securities America Advisors, and Securities America Incorporated are separate entities. Career advisor Sergio Patterson, attorney Matt McElroy are not affiliated with Securities America Advisors or Securities America Incorporated. Securities America Advisors, Securities America Incorporated, and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.

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