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Is Social Security Welfare? Why 1 Governor Said Yes


Source: Social Security Administration.

Social Security benefits are vital for millions of retirees. But some politicians don't like the program very much, and one recently compared the program to welfare. Does that claim make sense?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at comments made by Maine Governor Paul LePage suggesting that programs like Social Security constitute welfare. Dan notes that from one standpoint, Social Security has something in common with welfare programs in the sense that Social Security takes tax money from current workers and uses it to pay benefits to retirees. That makes Social Security a type of wealth-transfer system. But Dan also points out that the way most people understand Social Security -- i.e., you pay taxes now in the expectation of receiving benefits in the future -- differs greatly from Social Security generally. Dan concludes that Social Security will always be political, but that doesn't mean you shouldn't take into account the benefits you're entitled to receive in your financial planning.

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Read/Post Comments (6) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 22, 2014, at 1:03 PM, jwengs wrote:

    Sir, I am 62 this December, can I collect Social Security benefits if I get laid off from my job at the same time while collecting unemployment befits.

    Thank you.

    John Wenglikowski

  • Report this Comment On July 22, 2014, at 2:47 PM, dth wrote:

    It's hardly Welfare. Welfare is taking tax money and paying it to "special" sectors of the people.

    I pay my taxes as do most of us therefore I pay for Welfare programs, and what ever else the Gov. calls it when they spend Tax money.

    I also pay money into Social Security and have for 38 years. Social Security is not a tax and I do expect to get this money back.

    Is Dan assuming that people receiving Social Security now have not paid into the program.

    Lots of miss information about how much money has been paid into the Social Security program already. Most of the "Baby Boomers" paid into the program, and most of the 80 to 90 year olds I've talked with have paid into the program, including women that worked later in life.

    I think of the program as a mandatory Gov. savings program that I'll be getting back at 62 or later.

  • Report this Comment On July 22, 2014, at 3:10 PM, LeeG3 wrote:

    Unfortunately, the money paid into SS is considered a "TAX" by the government and Supreme Court. The benefits are therefore not the return of your principal plus interest. The end result is that the benefits can be changed at any time by a vote in Congress like what was done with extending the full benefit age from 65 to 67 or later. It is definitely NOT a savings program.

  • Report this Comment On July 22, 2014, at 3:34 PM, jinglej wrote:

    I, along with my employer, have paid into the SSI program for 50 years. I do not consider this welfare!!

    The real problem is when LBJ put the SSI funds into the general slush fund and they have taken from it ever since. If they had left it alone there would be plenty of money in the fund today. I don't want to hear these idiots...who I might add...work a few years and have a wonderful golden parachute set up for them!!

    I would say just shut up Mr. Governor.

  • Report this Comment On July 22, 2014, at 6:29 PM, danrlh wrote:

    Social Security in the US is all of that.

    It is a Ponzi Scheme:

    The very first person who received a Social Security monthly payment got a whole lot more than I (or any of us oldest baby boomers) will get as ROI on what we paid in SS taxes - about 100 or more times as much. I would get maybe $2 million per year and maybe a Quarter of a BILLION dollars if I lived to 100 years and got the ROI that the first person did.

    It is a retirement savings and income system:

    You pay taxes based on your earnings, and you get benefits based on your earnings.

    It is a welfare system:

    Lower income people get a much higher percentage back than higher income people. The lowest portion of a persons retirement benefit is based on 90% of her or his income, while the middle income portion is based on 32% of income, and the higher portion is base on only 15% of that higher income.

    It is a slush fund:

    By law (I believe), SSI funds must be invested in Federal government securities, so the government spends it as it accumulates. When benefits exceed taxes, the money comes back from the general fund. Full benefits will be paid (by current law) until the Social Security "trust fund" goes down to 0.

  • Report this Comment On July 23, 2014, at 1:49 PM, dusty10x wrote:

    Social Security is a program designed to be self-financed to PREVENT welfare....With Social Security you receive a modest monthly benefit that is usually above the poverty level......Without Social Security being self-financed by workers; the retirees would be receiving some type of welfare paid from the general tax rolls.....So it really saves the "other" taxpayers money......

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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