Why Social Security taxes are a good deal

From MarketWatch | By Jeff Reeves

ROCKVILLE, Md. — Staring at my wife’s annual tax documents this weekend, I couldn’t help getting fired up over what she paid into Social Security last year.

When I pointed out the money sunk into the entitlement program — a 6.2% haircut on her modest salary — she simply shrugged. And when I asked whether she thought she would ever see that money again, she just shrugged again.

I love my wife because she is so temperate. But she’s also not much of a planner. What if I get hit by a bus tomorrow? What if we suffer another market meltdown and her 401(k) plan goes up in smoke? Would this so-called social insurance actually provide for her if she had no other option, or would she be better off if the government just stopped taking its 6.2% and left her the heck alone?

There had to be a point where an individual could better provide for himself or herself than Social Security would. So using my wife’s income and payroll taxes as a case study, I set out to find it.

I did. But where it was surprised me, not only by proving how well Social Security works in its current form, but how it will even work well in a diminished form should our politicians fail to act.

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