Social Security is a combination of three independent schemes. First a distributive scheme, second the government running a public retirement plan, and third making investment in retirement mandatory. None of these programs seem justifiable individually, much less collectively.
The redistribution that social security provides seems nearly impossible to justify. It is systematically neither progressive nor regressive. The redistribution is done randomly and has little to do with income. The payroll tax which funds it is regressive for people only pay a tax on some of the money they get. Also, people who have higher incomes generally tend to live longer. People who live longer will receive more money from social security. If one is in favor of the other two aspects of social security they need not be in favor of the erratic methods by which it is funded.
The second part of social security is the government running a retirement plan. The problem with this as with so many other government programs is it is quite inefficient. As of 2017 in about the first half of the year, the interest rate of the S&P 500 has been 9.7 percent. The average over the past 90 years is 9.8 percent. Now adjusted for inflation this is closer to seven percent. However the effective interest rate from social security was 3.2 percent in 2016, 3.4 percent in 2015, and 3.6 percent in 2014. It's interest rate hasn't been anywhere near the interest rate of private retirement plans. One would have to go back to the year 2000 to find a year when the social security interest rate was about equal to the average interest rate in the private market. Government invariably ends up doing things badly when it tries to do them. With the market interest rate so much higher then the interest rate provided by social security it seems inefficient for the government to have a retirement plan in the first place. If one wanted investment to be mandatory but wanted to give people the choice of how they invest there is very basic way to implement this. Simply give everyone a voucher which they can only spend on retirement. This would allow the high interest rate of the free market but make sure everyone put money into retirement. I am against this but it would be a way to partially privatize social security. While I favor complete privatization it seems logical to only pseudo privatize it.
The third and final aspect of social security is forcing everyone to invest in retirement. One major problem with this is it forces everyone to invest the same amount of money. Suppose someone who was fifty was diagnosed with cancer and was expected to live about five more years. It would not make sense for that person to invest in retirement, for they will not be able to reap the rewards. This particular instance is not very common. What is much more common however are people who aren't very healthy and probably won't live very long. If someone is expected to live to 70 it does not make sense for them to invest as much money in retirement as someone who is expected to live to 90. Even if everyone were completely rational people would invest wildly different amounts in retirement.
I also have an objection to social security on principle. The idea behind forcing everyone to invest a certain amount of money in retirement seems totally antagonistic to liberty. If people are free they may do incredibly stupid things. They may do things that harm them in the long run. However, I believe that a person does not have the right to restrict the freedom of another unless the other is using their freedom to cause harm. If a person invests in social security the only person who is harmed is the individual who did not invest. For the same reason that I believe people should be allowed to smoke marijuana, I believe that people should be allowed not to invest in retirement. Restricting the freedom of an individual for their own self interest is arrogant and noneffective. The person best equipped to spend the money of an individual is the individual them self. Freedom should not be compromised by the whims of a social engineer.
The third and final aspect of social security is forcing everyone to invest in retirement. One major problem with this is it forces everyone to invest the same amount of money. Suppose someone who was fifty was diagnosed with cancer and was expected to live about five more years. It would not make sense for that person to invest in retirement, for they will not be able to reap the rewards. This particular instance is not very common. What is much more common however are people who aren't very healthy and probably won't live very long. If someone is expected to live to 70 it does not make sense for them to invest as much money in retirement as someone who is expected to live to 90. Even if everyone were completely rational people would invest wildly different amounts in retirement.
I also have an objection to social security on principle. The idea behind forcing everyone to invest a certain amount of money in retirement seems totally antagonistic to liberty. If people are free they may do incredibly stupid things. They may do things that harm them in the long run. However, I believe that a person does not have the right to restrict the freedom of another unless the other is using their freedom to cause harm. If a person invests in social security the only person who is harmed is the individual who did not invest. For the same reason that I believe people should be allowed to smoke marijuana, I believe that people should be allowed not to invest in retirement. Restricting the freedom of an individual for their own self interest is arrogant and noneffective. The person best equipped to spend the money of an individual is the individual them self. Freedom should not be compromised by the whims of a social engineer.
https://www.cnbc.com/2017/06/18/the-sp-500-has-already-met-its-average-return-for-a-full-year.html
http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
https://www.ssa.gov/oact/progdata/intRates.html
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