If you could opt out of social security, would you?

[Anonymous]

Background: my spouse is a permanent resident working in an international organization. As such, among other things, he doesn't pay social security or medicare. (I do pay, soin principle he will get a survivor benefit thru me). He is thinking of becoming a US citizen, which, among other things, would mean beginning to pay SS and medicare. In other words, he has the option, by deciding not to become a USC, to continue to opt out of SS and medicare. No payments, but no benefit at the end (other than eventual survivor benefit). He has a nice pension thru his employer. Also, It is likely that we will retire abroad in a couple of decades,which would mean that he wouldn't be able to use medicare even after contributing for a couple of decades. (Unlike SS, you have to live in the US to enjoy medicare during your retirement).

If you could opt out of SS, would you? Would you rather invest the $7,000 or so of your part of SS annual contributions instead of giving it to the SS system with the hope that it will still be there in two decades? Does having a survivor benefit thru your paying spouse change your equation? Does the fact that the employer would pay the other half of SS contribution make a difference in your calculation?

[Anonymous]

I'm a late baby boomer (almost 50) so SS has been in perpetual peril my whole life. I understand the basics of the program but still don't think of it as a "retirement" plan, at least, not like other retirement plans, which are built around the individual. We have a HHI under $100k and get by living inside the beltway - own a house but bought it at the peak - and one 10-year old car.

Anyway, it seems those better off than me figure they could do better without SS by just keeping and investing the money. And they might be right. A lot of those making less than me would end up like I probably would; the money would just get sucked up with the ongoing debt, car repairs, braces and broken appliances than regularly wreck my budget. If we all suddenly had more cash, housing and such would get bid up in price because us poor suckers would just spend it.

Despite efforts to get Americans to save for retirement, MOST Americans get MOST of their income from Social Security after they stop working because MOST of us aren't earning twice the national average (about $50k HHI) and because we SUCK at saving.

So, I guess the answer is that I would not opt out. It's a shared pool retirement plan. Most Americans will lean heavily on its benefits and I think its long term health is best served by keeping everybody in it.

It's not a calculation. At least, not a personal one.

[Anonymous]

Yes, without a moment's hesitation. I am a very big saver and have been contributing to my employer's maximum matching % since I was 22. My nest egg after 20 years is quite healthy and legally MINE. My same ~5-6% skimmed off by FICA? Long gone, and I'll likely never see it again. Paid out to my parents is how I'll choose to look at my loss because I know SS will be bankrupt before I retire in 30 years.

[Anonymous]

My fed co-worker retired and started receiving her SS + pension. She died 4 months later in her sleep.

There are no guarantees in life.

[Anonymous]

Yes. I'll never see any money from it. Why not just restructure the program and call it what it has become and what it should be at this point: welfare for old people.

[Anonymous]

No, I wouldn't opt out, but not because I think I'll get any of it back. I've saved enough to retire comfortably and don't need the extra SS money. I'm assuming by the time I retire there will be means testing of some sort so I probably won't get much back, but there are many less fortunate.

[Anonymous]

I would opt out because I'd rather save it independently. That being said it would NOT be a factor for me in considering citizenship.

[Anonymous]

Yes, in a heartbeat

[Anonymous]

Anonymous wrote:No, I wouldn't opt out, but not because I think I'll get any of it back. I've saved enough to retire comfortably and don't need the extra SS money. I'm assuming by the time I retire there will be means testing of some sort so I probably won't get much back, but there are many less fortunate.

I agree. With my pension plus what I will save, I will be fine without SS. I'm blessed and am happy to pay FICA taxes to help others who have earned an honest living and still retire with little.

[Anonymous]

Another way to ask the question is: if you were not paying FICA taxes now (and not securing a benefit for later), would you sign up for the programs so that you begin paying taxes (and secure a benefit later)?

[Anonymous]

The problem is that FICA is designed to protect the whole country from those who would not otherwise save and would spend their money and then would uninsured and without income when they get to an age when they cannot work. For anyone who makes below about $80K (upper middle class), it is very easy to live beyond your means and to find plenty of places to spend any additional income that you have, even on quite reasonable expenses. And then, they would be left at age 70, having a harder and harder time working, possibly getting fired or laid off and having no means to support themselves and then ending up being a greater cost to society.

The question I have for those who would opt out is: how many of you are middle class and below? In the DC metro area, that's about $90K and down. I would guess that most of the people who would opt out, probably make $150K and up, which is about 300% of the national median HHI and about 166% of the DC metro area median HHI. These are the people that the system cannot afford to lose or the system would collapse. Basically, the system only works if everyone contributes to the system.

[Anonymous]

First, I would never make a decision whether to become a US citizen purely on tax reasons.

Second, there are a lot of other tax issues other than FICA for a resident alien, including estate and gift tax.

Third, just taking the question on face value, I would stay in SS/FICA because it's guaranteed as long as you live-- so it's like longevity insurance, and it can be very expensive to get an equivalent annuity payment.

It is a myth that SS will not be around in 30 years-- which I think is spread by Republicans who want to undermine the program. The fact is that SS has been about 20-30 years away from "insolvency" for the last 30 years. The actuaries use very conservative calculations in projecting SS. Moreover, even if SS only paid out what it took in, it would still pay about 80% of the expected benefits.

[Anonymous]

I would not base any citizenship decision on Social Security.

I would however suggest that you husband visit an accountant to understand the ramifications of the decision, especially if you may not always live in the US. Being a US expat is a huge headache in terms of filing taxes etc.

[Anonymous]

Considering you are not entitled to any of the principle you pay into SS, the obvious answer is yes to opt out of it.

[Anonymous]

Nope, I wouldn't.