DEFINITION OF INSURANCE

1998 Larsen

INSURANCE: A system of protection against financial loss resulting from fire, accident, death or like. A contract whereby one party , usually a company, guarantees to repay the other party for such a loss, in return for the yearly payment of a smaller sum, called a premium. The premium, the amount of payment thus guaranteed.

Many refer to Social Security as an insurance program and not as an investment. However, by definition there is no contract and Social Security is not guaranteed. The Supreme Court of the United States ruled that since no benefits were guaranteed, the program was not by definition a ponzi scheme. Social Security has no guarantee and there is no written and signed contract. Therefore, by definition, Social Security is not an insurance program.

Sure Social Security provides disability coverage for families and workers, but at what cost? Typical disability policies cost about 1 to 1.5% of salary. The Disability tax is 2.1% which is a full 40% more than one could obtain else where. Do you like paying more for items?

The OASI program rewards only those who live long enough to collect. At the current rate of 10.3% payroll tax, even a minimum wage person would do better putting their money in United States Savings bonds which have the least risk of any investment today. We are not talking about investing in equities or having to pay commissions. We are talking about United States Savings bonds which can be purchased at no charge. In fact many companies have automatic with holding for US Savings bonds. Therefore, who would buy the same insurance policy form company "A" when you can get the same identical product from company "B" for 50% less?

When the current retirees worked, they took more home. Why did they take more home? "Because the FICA tax was on only the first 120% of the average wage and taxed at 1%." If current retirees think they are having it badly, what do they think will happen to current workers when they retire? The current worker is paying adjusted for inflation 15 times more in FICA taxes then when Social Security Started. Another way of putting this into perspective is if current retirees had paid the same FICA tax on the base their wages were subjected to this generation on average would have $6 Trillion less. Another way of saying this is "CURRENT RETIREES OWE THE OASI FUND $176,470 EACH!" In fact the amount is much greater, but there is no way to calculate the effect of the increase in the base subjected to FICA. If one new the distribution of wages for each year, one could make a good estimate, but the numbers to do not exist.

If the current retirees do not wish to cough up $176,470 each, then they should not ask the next generations to pay for something they themselves do not want to pay for. Current retirees should be helping out in solving the problem instead of exasperating it by not taking a 50 to 70% benefit cut. Not only are they leaving the future generations out on a limb with Social Security, but they have racked up a $5.4 Trillion debt with no intention of helping to pay the bill. I am sorry, but this party is going to come to an end either with a plan or with drastic cuts in the future. Are seniors going to help solve the problem they created or continue to be the problem? As for Social Security being a SUCCESSFUL program actually depends on whether you are on the receiving or paying side does it not?

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