Elon Musk recently made headlines by asserting in a podcast that Social Security “is the biggest Ponzi scheme of all time.” However, this characterization of Social Security is misleading and inaccurate. A Ponzi scheme is a fraudulent investment system that pays existing investors with funds collected from new investors. Social Security, on the other hand, was designed and functions as an income insurance policy for retirees.
During their working years, employees and employers contribute to Social Security. Upon retirement, beneficiaries receive monthly benefits based on the contributions made over their careers. For many retirees, this system provides essential financial security.
Carl Goodwin, a retired worker from Wilsonville, explains: “During my working years, I and the companies I worked for contributed to Social Security on my behalf. When I retired, I began receiving a monthly benefit based on how much had been contributed.”
“Ten years into retirement, my benefits matched my past contributions.
Misleading claim about Social Security
After that, the benefit has continued to be paid with contributions from others whose retirement is in the future. I consider that a return on my investment, and a reward for my funding of the benefits of past retirees while I was working,” Goodwin said. Carl highlights that the essence of Social Security is collective responsibility and intergenerational support.
He emphasizes that while working, he was content to see his payments supporting his parents and their generation. This sense of mutual support provided him with a reasonable expectation that he would receive the same benefits in retirement. The claim that Social Security is a Ponzi scheme only holds if the system were to be destroyed or fundamentally altered.
For 88 years, Social Security has been a reliable source of income for retirees, and dismantling it would indeed create a fraudulent situation. Carl concludes, “We can’t let that happen.” He echoes the sentiment of many who believe in preserving Social Security as a crucial safety net for future generations.
Photo by; Ernie Journeys on Unsplash