PRAUSA
Inherently Flawed
Social Security is structurally unsound, offering poor returns, no ownership, and inevitable insolvency—a system that fails workers while suppressing wealth creation.
Social Security is widely treated as an indispensable pillar of American retirement, yet when examined honestly and comprehensively, it becomes clear that the system possesses no redeeming structural value. Eighty-five years of political improvisation have turned it into a vast, unstable transfer mechanism—one that offers poor returns, no ownership, no inheritability, and no real security. What was once marketed as social insurance has become a generational burden, a political football kicked back and forth without ever acknowledging or addressing its fundamental flaws. The result is a program that fails workers, penalizes the poor, suppresses savings, and leaves every generation more vulnerable than the last. This is not an unfortunate accident—it is the predictable outcome of a system built on flawed premises.
The following points illustrate just a portion of the structural and moral inequities embedded in Social Security.
A. Structural and fiscal flaws
Pay-as-you-go, not real saving. Current payroll taxes are immediately paid to today’s retirees; nothing is saved or invested for the worker who pays, so benefits depend on future taxpayers, not accumulated assets.
Trust fund “IOU” problem. The trust fund consists entirely of Treasury bonds that represent claims on future taxes; when redeemed, government must raise taxes, borrow, or cut other spending—there is no independent pool of real capital. In practice, redemption is almost always financed by new borrowing, adding directly to the national debt.
Inevitable insolvency and forced cuts. Trustees project OASI insolvency around 2033–34; absent reform, benefits for all retirees are automatically cut roughly 20–25 percent. Congress could avoid the automatic cut only by raising taxes, raising the retirement age, slashing benefits, expanding means-testing, or some combination—every option is painful.
Huge unfunded liability and implicit debt. Long-range shortfalls in the tens of trillions translate into a massive hidden claim on younger and unborn workers.
Crowds out real capital formation. Because essentially 100 percent of payroll-tax income is immediately paid out—and shortfalls are filled by drawing down the trust fund—Social Security suppresses private saving and reduces the pool of capital available for productivity, wages, and growth.
B. Poor financial deal for workers
Low or negative lifetime returns. Many younger workers are projected to receive a zero or negative real return—getting less in benefits than they pay in taxes—even before any future cuts.
Far below market alternatives. If workers invested the OASI portion of payroll taxes in conservative portfolios, many would receive multiple times the monthly income Social Security provides, even under cautious return assumptions.
Lost opportunity cost. Every dollar forced into the system is a dollar that cannot be invested in real assets; over a 40-year career, compounding makes the loss enormous—hundreds of thousands of dollars for lower-income workers and millions for high earners.
Social Security benefits are taxable. For many retirees, up to 85 percent of SS benefits are subject to federal income tax, further lowering the already-poor effective return.
Punishes continued work. The benefit formula and retirement-age rules generate very low or even negative returns on payroll taxes paid later in life, discouraging older workers from staying in the labor force.
C. Inheritability, ownership, and legal rights
No true ownership or property right. Under the Supreme Court’s Nestor v. Fleming ruling, workers have no contractual right to promised benefits; Congress can change or cut them at any time, regardless of taxes paid.
Non-inheritability for most workers. For single or childless workers—and for many who die before or early in retirement—decades of payroll taxes vanish; survivors’ benefits are modest and consume only a small share of OASI outlays.
Blocks intergenerational wealth building. Because balances cannot be bequeathed, Social Security prevents working-class families from turning a lifetime of earnings into inheritable capital; any “surplus” at death reverts to the system instead of to heirs.
Turns retirees into political supplicants. Elderly Americans must rely on elected officials to maintain benefits and COLAs, rather than drawing on assets they actually own and control. The structure promotes long-term dependency.
D. Regressive and discriminatory effects
Bad deal for the poor. Despite progressive formulas, poorer seniors remain more likely to be in poverty; the program costs too much and pays too little, especially for workers who rely solely on SS at retirement.
Especially bad for Black Americans. Because Black workers have lower life expectancy and different marital patterns, they pay payroll tax for more years yet, on average, collect fewer benefits and receive lower rates of return, with lifetime transfers estimated around $10,000 per person on average from Black workers to White workers.
Penalizes early labor-force entry. Poorer workers who enter full-time work earlier pay tax for more years without proportional benefit increases, eroding the system’s supposed progressivity.
Regressive payroll tax. The 10.6% OASI tax applies up to the wage cap and falls entirely on labor; low- and middle-income workers often pay more in payroll tax than in income tax. Because the wage cap is now very high, upper-income workers also bear a substantial absolute burden despite receiving proportionally smaller benefits.
E. Distortions, inefficiency, and design problems
Complex, opaque benefit formula. The AIME/PIA rules, bend points, and auxiliary benefits are nearly impossible for ordinary workers to understand, obscuring implicit tax rates and making rational planning harder.
Marriage and household distortions. Spousal and survivors’ rules create arbitrary bonuses and penalties—rewarding one-earner couples and penalizing some dual-earner or divorced households, independent of need.
Inefficient way to aid the truly needy. Social Security sends large checks to affluent retirees while leaving many truly poor seniors with inadequate support; a targeted safety net could help the vulnerable at far lower cost and with far fewer distortions.
Encourages under-saving outside the system. Because workers are told Social Security will “take care of them,” many save too little privately—only to discover at retirement that SS replacement rates fall far short of maintaining their standard of living.
F. Political and moral defects
Permanent political risk. Because the system is statutory and pay-as-you-go, every election reopens debates over retirement ages, COLAs, means-testing, and tax hikes; workers face greater political risk inside SS than market risk in diversified long-term investing.
Intergenerational redistribution by coercion. Younger workers are forced to finance older cohorts under threat of law, regardless of consent or individual need—treating productive people as means to others’ ends.
Altruist-collectivist premise built into the design. The system is explicitly structured around sacrifice of producers for vaguely defined “social” goals; its core premise makes it unworkable.
Massive, incalculable lost opportunity. Over many decades, trillions in potential privately owned, inheritable capital have been replaced by unfunded political promises—foreclosing entrepreneurship, home ownership, and real wealth accumulation for millions of families.
The conclusion is unavoidable: a program built on unsound principles cannot be repaired by tinkering at the margins. After generations of patchwork, promises, and postponement, the time has come to Retire Social Security—responsibly, deliberately, and permanently—and replace it with a system rooted in ownership, transparency, and genuine security. The American people deserve better than endless dependency on a failing structure; they deserve the dignity and freedom of a retirement built on real assets, not political promises.
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PRAUSA
© Copyright 2025. Personal Retirement Accounts. All Rights Reserved. Content may not be reproduced without permission.
Inherently Flawed
Social Security is structurally unsound, offering poor returns, no ownership, and inevitable insolvency—a system that fails workers while suppressing wealth creation.
Social Security is widely treated as an indispensable pillar of American retirement, yet when examined honestly and comprehensively, it becomes clear that the system possesses no redeeming structural value. Eighty-five years of political improvisation have turned it into a vast, unstable transfer mechanism—one that offers poor returns, no ownership, no inheritability, and no real security. What was once marketed as social insurance has become a generational burden, a political football kicked back and forth without ever acknowledging or addressing its fundamental flaws. The result is a program that fails workers, penalizes the poor, suppresses savings, and leaves every generation more vulnerable than the last. This is not an unfortunate accident—it is the predictable outcome of a system built on flawed premises.
The following points illustrate just a portion of the structural and moral inequities embedded in Social Security.
A. Structural and fiscal flaws
Pay-as-you-go, not real saving. Current payroll taxes are immediately paid to today’s retirees; nothing is saved or invested for the worker who pays, so benefits depend on future taxpayers, not accumulated assets.
Trust fund “IOU” problem. The trust fund consists entirely of Treasury bonds that represent claims on future taxes; when redeemed, government must raise taxes, borrow, or cut other spending—there is no independent pool of real capital. In practice, redemption is almost always financed by new borrowing, adding directly to the national debt.
Inevitable insolvency and forced cuts. Trustees project OASI insolvency around 2033–34; absent reform, benefits for all retirees are automatically cut roughly 20–25 percent. Congress could avoid the automatic cut only by raising taxes, raising the retirement age, slashing benefits, expanding means-testing, or some combination—every option is painful.
Huge unfunded liability and implicit debt. Long-range shortfalls in the tens of trillions translate into a massive hidden claim on younger and unborn workers.
Crowds out real capital formation. Because essentially 100 percent of payroll-tax income is immediately paid out—and shortfalls are filled by drawing down the trust fund—Social Security suppresses private saving and reduces the pool of capital available for productivity, wages, and growth.
B. Poor financial deal for workers
Low or negative lifetime returns. Many younger workers are projected to receive a zero or negative real return—getting less in benefits than they pay in taxes—even before any future cuts.
Far below market alternatives. If workers invested the OASI portion of payroll taxes in conservative portfolios, many would receive multiple times the monthly income Social Security provides, even under cautious return assumptions.
Lost opportunity cost. Every dollar forced into the system is a dollar that cannot be invested in real assets; over a 40-year career, compounding makes the loss enormous—hundreds of thousands of dollars for lower-income workers and millions for high earners.
Social Security benefits are taxable. For many retirees, up to 85 percent of SS benefits are subject to federal income tax, further lowering the already-poor effective return.
Punishes continued work. The benefit formula and retirement-age rules generate very low or even negative returns on payroll taxes paid later in life, discouraging older workers from staying in the labor force.
C. Inheritability, ownership, and legal rights
No true ownership or property right. Under the Supreme Court’s Nestor v. Fleming ruling, workers have no contractual right to promised benefits; Congress can change or cut them at any time, regardless of taxes paid.
Non-inheritability for most workers. For single or childless workers—and for many who die before or early in retirement—decades of payroll taxes vanish; survivors’ benefits are modest and consume only a small share of OASI outlays.
Blocks intergenerational wealth building. Because balances cannot be bequeathed, Social Security prevents working-class families from turning a lifetime of earnings into inheritable capital; any “surplus” at death reverts to the system instead of to heirs.
Turns retirees into political supplicants. Elderly Americans must rely on elected officials to maintain benefits and COLAs, rather than drawing on assets they actually own and control. The structure promotes long-term dependency.
D. Regressive and discriminatory effects
Bad deal for the poor. Despite progressive formulas, poorer seniors remain more likely to be in poverty; the program costs too much and pays too little, especially for workers who rely solely on SS at retirement.
Especially bad for Black Americans. Because Black workers have lower life expectancy and different marital patterns, they pay payroll tax for more years yet, on average, collect fewer benefits and receive lower rates of return, with lifetime transfers estimated around $10,000 per person on average from Black workers to White workers.
Penalizes early labor-force entry. Poorer workers who enter full-time work earlier pay tax for more years without proportional benefit increases, eroding the system’s supposed progressivity.
Regressive payroll tax. The 10.6% OASI tax applies up to the wage cap and falls entirely on labor; low- and middle-income workers often pay more in payroll tax than in income tax. Because the wage cap is now very high, upper-income workers also bear a substantial absolute burden despite receiving proportionally smaller benefits.
E. Distortions, inefficiency, and design problems
Complex, opaque benefit formula. The AIME/PIA rules, bend points, and auxiliary benefits are nearly impossible for ordinary workers to understand, obscuring implicit tax rates and making rational planning harder.
Marriage and household distortions. Spousal and survivors’ rules create arbitrary bonuses and penalties—rewarding one-earner couples and penalizing some dual-earner or divorced households, independent of need.
Inefficient way to aid the truly needy. Social Security sends large checks to affluent retirees while leaving many truly poor seniors with inadequate support; a targeted safety net could help the vulnerable at far lower cost and with far fewer distortions.
Encourages under-saving outside the system. Because workers are told Social Security will “take care of them,” many save too little privately—only to discover at retirement that SS replacement rates fall far short of maintaining their standard of living.
F. Political and moral defects
Permanent political risk. Because the system is statutory and pay-as-you-go, every election reopens debates over retirement ages, COLAs, means-testing, and tax hikes; workers face greater political risk inside SS than market risk in diversified long-term investing.
Intergenerational redistribution by coercion. Younger workers are forced to finance older cohorts under threat of law, regardless of consent or individual need—treating productive people as means to others’ ends.
Altruist-collectivist premise built into the design. The system is explicitly structured around sacrifice of producers for vaguely defined “social” goals; its core premise makes it unworkable.
Massive, incalculable lost opportunity. Over many decades, trillions in potential privately owned, inheritable capital have been replaced by unfunded political promises—foreclosing entrepreneurship, home ownership, and real wealth accumulation for millions of families.
The conclusion is unavoidable: a program built on unsound principles cannot be repaired by tinkering at the margins. After generations of patchwork, promises, and postponement, the time has come to Retire Social Security—responsibly, deliberately, and permanently—and replace it with a system rooted in ownership, transparency, and genuine security. The American people deserve better than endless dependency on a failing structure; they deserve the dignity and freedom of a retirement built on real assets, not political promises.
Learn more
Want to learn more or get involved?
Click the link below to get added to our newsletter and learn ways to get involved with the move to PRA accounts.
© Copyright 2025. Personal Retirement Accounts. All Rights Reserved. Content may not be reproduced without permission.