Social Security is a major component of payroll in any business. Social Security is essentially a federally administered fixed annuity. A fixed annuity is a readily available commercial insurance product where a person makes periodic deposits in return for fixed future payouts. With a fixed annuity the issuer (the insurance company or the government) assumes the investment risk, while in a variable annuity the annuity owner accepts the investment risk.
Therefore, social security is nothing more than a fixed annuity that collects premiums in the form of Social Security taxes, which are withheld from your earned income to provide a steady stream of income in retirement. From each paycheck, 6.2% of your gross income is withheld from you. Another 6.2%, which might have been part of your wages if your employer was not required to match your contribution, is added by your employer and forcibly placed into a nationalized monopolistic annuity program. Why does the federal government feel compelled to administer a fixed annuity program?
Fixed annuities have been around forever and are available in the competitive commercial market. Fixed annuity providers in the public market space are forced to keep internal expenses low and make prudent investments that will outperform their competitors. By contrast, social security is not only mandatory in terms of contribution, but it is a government monopoly not subject to any competition. While liability insurance is compulsory if you drive a car, we leave it up to market forces to keep the rates in check.
Why is this not the case with Social Security? Do we even still need a nationalized monopolistic annuity program known as Social Security, or would Americans be better off if Social Security were privatized?
