Opting Out of Social Security

It is extremely important for young workers who are just starting their career to begin developing a plan to save for retirement. This might not be the first thing that comes to mind for a person in his or her first job, but in the United States, there are more than 25 million people over age 60 living on less than $30,000 a year. Many people just don’t put away enough money throughout their lives to live comfortably after they retire.
 
Signed by FDR in 1935, the Social Security Act was intended to be a safety net against this problem. It was supposed to protect adults age 65 and older from becoming impoverished after they stop working. While the legislation had good intentions, there were some unforeseen consequences as well. Workers were forced to pay into the program, and many didn’t think to invest in other retirement plans, leaving only that money to fall back on. The CBO has long argued that Social Security has most likely had a negative impact on private spending.
 
Social Security is a minimum safety net – not enough for most people to find comfortable when they retire. The average American’s salary is around $46,000 a year, resulting in a yearly Social Security payment of around $2,800. If that person works for 30 years before retirement, that leaves only $84,000 for the person to live on for the rest of their life, on average another 20+ years. Of course, salaries for a lot of workers will rise as they continue in their careers, but that is not the case for everyone. Most people need to have another source of income to complement Social Security in order to provide adequately for themselves post retirement.
 
Not only are current benefits inadequate for most people, young Americans increasingly do not even believe they will receive anything. In a 2015 Gallup poll, over 50% of non-retirees doubted that they would receive any Social Security benefits. Another two-thirds admitted that they believe that social security is currently in a crisis. A Bloomberg national poll showed that only 15% of adults belief that social security will “definitely be there” when they retire.
 
Unfortunately, though, young Americans are forced into this bad investment — there is no ability to opt out.
 
The IRS does have a form that allows religious groups to opt out of social security all together, but only on the basis of religious principles.
 
A few years ago, House Republicans introduced legislation that would allow employees to contribute money into a S.A.F.E. account instead of social security. This account was a trust that was reserved solely for the individual and their beneficiaries, instead of a huge pot that every worker pays into and every retiree takes out. Other alternatives to Social Security have been discussed, such as means tested assistance programs, retirement bonds and universal pensions.
 
There are other options that may work better for certain workers, such as IRAs and 401Ks, but these do not solve the problem of being forced to pay into the program without guaranteed returns.
 
For young Americans, the clock is ticking for finding better options. The Congressional Budget Office’s baseline projections predict Social Security will be insolvent by calendar year 2029.
 
While the Savings Account for Every American Act of 2011 did not make it out of committee, it showed that reform is not out of the question for a Congress historically wary of any changes to Social Security.
 
The next generation knows we are on the hook for programs we will likely never benefit from. While large-scale reform is notoriously difficult for Congress to achieve, now is the time to keep pushing for options so that the savings and retirements of millions of young Americans are not held hostage to a failing program.