The Social Security system takes "investments" from taxpayers. Early "investors" were paid handsomely. The following researcher claims that some people who retired in 1960 collected 8 times more in benefits than they paid in. There's your early investor payoff: http://www.politifact.com/truth-o-meter/article/2013/feb/01/medicare-and-social-security-what-you-paid-what-yo/
Even today (and as long as the system stays "solvent"), just about everyone who draws from Social Security will be paid many times more than their contributions.
How is that possible?
It's not. Not for long, anyways.
And, does that make Social Security a Ponzi Scheme?
It's actually worse than a Ponzi Scheme. Worse because participation is mandatory. Worse because today's younger generation may very well find themselves on the hook to prop up a system that they did not create to benefit generations of retirees who either did create it, or did nothing about it, despite the fact that they should have known better. It gets worse...
Those that withdraw more money than they contributed feel as if they are entitled to every penny they have withdrawn. Their logic: "If I had invested that money, I would have made much more. The government owes me way more than I have withdrawn".
And this could not be further from the truth.
Funds paid in to Social Security are placed in one of two different trust funds. By law, these funds cannot be invested. Therefore, since no interest is earned, the value of those contributions are exactly equal to....their contributions. Any upward adjustment to the value of contributions comes at the expense of taxpayers, either as a direct expense, or by eroding the value of the dollar by way of inflation.
Many seniors point to the fact that the government can borrow from the social security trusts, and are therefore entitled to that interest. This is also incorrect. First, you cannot borrow money from yourself. In the true sense of the word, you can only borrow money when you don't have money. What this so called borrowing really is is just shifting. No interest is due. In my opinion, previous generations either did not hold THEIR government accountable for irresponsible spending, or they turned a blind eye to it because they felt that interest payments would benefit them. Either way, they allowed it to happen due to a dereliction of their duties as voters and for anyone to expect later generations to pay them interest is absurd.
If the system was equitable, the value of their contributions would be equal to the actual amount of contributions, less the amount of debt their irresponsibility costs future generations.
