A recent opinion poll on Americans' attitudes toward Social Security confirmed some old statistics and revealed some interesting new ones. In particular, almost one-third of Americans would walk away from Social Security and all the taxes they've paid simply to be free to manage their own retirement savings.
The new poll, taken by Rasmussen Research in late May 1999, shows a majorityof Americans favoring the option of investing part of their payroll taxes inthe market. That's nothing new: a July 1998 Gallup poll showed 66 percent infavor of personal accounts; a December 1998 International CommunicationsResearch poll showed 74 percent in favor, and an August 1998 surveyconducted for the Democratic Leadership Council found 72 percent ofDemocrats favoring personal investing.
But the latest poll presents exciting new evidence of public frustrationwith Social Security and the desire of many Americans to get out, whateverthe cost.
Only 28 percent of respondents in the Rasmussen survey call Social Securitya good deal for today's workers, and by a three-to-one margin Americansthink that politicians will spend projected budget surpluses rather thansave them for Social Security.
A strong majority of Americans look at Social Security as a faulty product -they simply want to return it and get their money back. Given the chance todo just that - to get back all the taxes they've paid in exchange forforgoing future benefits - two of three would give up Social Security andprovide for their own retirement. Only one in five, most likely olderindividuals nearing retirement, would stay.
Even more startling is that one of three would opt out of Social Securityand go it alone, even if they didn't get back a cent of the payroll taxesthey've put it. Like defectors from Eastern Bloc countries, millions ofAmericans are willing to leave everything behind and jump the wall toretirement freedom.
Opponents of Social Security privatization call those would-be defectorsirrational Chicken Littles, insisting there's nothing wrong with SocialSecurity that a tax-hike nip here and a benefit-cut tuck there can't fix.Like the band on the Titanic, which continued playing "Nearer My God toThee" while the ship was sinking, these crisis deniers play the same oldbig-government tunes as the waves of insolvency begin lapping at SocialSecurity's decks.
But for most Americans under age 40, walking away from Social Securitywouldn't be an act of panic. Going it alone could be the smartest thing todo, even if they had to sacrifice all prior taxes as part of the bargain.For one thing, beginning in 2014 taxes will have to be raised to repay thebonds in the Social Security Trust Fund, making Social Security an evenworse deal than it is now. By 2030 a couple earning average wages would haveto pay more than $2,500 in extra payroll taxes each year simply to qualifyfor the same paltry benefits Social Security pays now.
And if individuals could invest their payroll taxes in the market, it wouldtake only about 20 years to build up savings sufficient to match SocialSecurity's monthly retirement benefits.
It isn't just the super-rich we're talking about. The average person payinginto Social Security, who makes less than $29,000 per year, could pay taxesfor two decades and still be better off on his own. If he invested hispayroll taxes in a long-term stock fund making average returns, after only25 years he would have $235,000, enough to purchase an annuity matchingSocial Security's retirement payments and disability insurance as well.
After 45 years of investing, the average worker would have $1.1 million.With the extra money saved over an entire working lifetime, individualscould afford a better standard of living in retirement or leave asubstantial inheritance for their children in the event of their earlydeath. Plus, they would have the peace of mind of not having to rely onpoliticians to keep their promises decades into the future.
Why is it that no worker would walk away from his 401k plan after years ofinvesting? Because he has real savings, earning a real rate of return, in anaccount that belongs only to him. All the present system offers is evenhigher taxes, even lower benefits and even less security.
What does it say about the public's confidence in Social Security thatalmost a third of Americans would simply walk away, no questions asked? Andmore important, what does it say about the future of Social Security thatthey would be smart to do so?