Wednesday, May 18, 2011

What a 22 Year-old Needs to Know About Social Security

Prof. Antony Davies [Duquesne University] analyzes Social Security in the United States through the lens of a typical 22 year old American. Assuming that Social Security is completely solvent, the expected return on investment (ROI) of Social Security is far lower than the expected ROI of a private account. Further, if an individual could hypothetically opt out of Social Security payments and invest the funds entirely in Treasury Bills, the Treasury bills would even yield a greater ROI.


  1. Though I agree with the premise, how many are savvy enough to make good use of this money if they were in charge?

  2. To me what a 22 year old needs to know about social security is that it will not be privatized that the benefits they receive will be lessened and that its underfunding can and will be solved relatively painlessly. Aside from social security 22 year olds need to understand that they have plenty of great privatized vehicles they can use to build up a retirement nest egg. They need to start early.
    The 22 year olds I talk to assume it won't be there when they retire. I believe it will be and it will be a pleasant surprise for them.

  3. I hate that a percent of my money goes to the government and I have no control over it. (Talking Social Security, not Federal Taxes, although not a big fan of that either.)

    There is a question if any money will be around when we retire at all. If that is the case, then it will be a huge ripoff for all of us that have contributed year in and year out.

    Basically, what every 22 year old (and everyone else) needs to know is that you have to have your own back. Always be able to support yourself.

  4. My opinion is that the government will never allow social security to be privatized because it will cut off a major funding source for federal spending. As the video points out, Social Security will be a pretty bad "investment" for the younger generation, and to me amounts to a hidden tax on retirement wealth. It would not surprise me if those entering the workforce today did not receive a negative return on their money.