What Happens If You Opt Out Of Social Security ?

Merrill Matthews at the Wall Street Journal posted an article on Saturday detailing what has happened to three Texas counties that opted out of Social Security thirty years ago.

The article reports:

…Now, 30 years on, county workers in those three jurisdictions retire with more money and have better death and disability supplemental benefits. And those three counties—unlike almost all others in the United States—face no long-term unfunded pension liabilities.

Since 1981 and 1982, workers in Galveston, Matagorda and Brazoria Counties have seen their retirement savings grow every year, even during the Great Recession. The so-called Alternate Plan of these three counties doesn’t follow the traditional defined-benefit or defined-contribution model. Employee and employer contributions are actively managed by a financial planner—in this case, First Financial Benefits, Inc., of Houston, which originated the plan in 1980 and has managed it since its adoption. I call it a “banking model.”

If the states are laboratories for the federal government, I think we just had a successful test in the laboratory.

The article further points out:

If a worker participating in Social Security dies before retirement, he loses his contribution (though part of that money might go to surviving children or a spouse who didn’t work). But a worker in the Alternate Plan owns his account, so the entire account belongs to his estate. There is also a disability benefit that pays immediately upon injury, rather than waiting six months plus other restrictions, as under Social Security.

The concept here is that the money invested belongs to the person–not the government–that’s why the plan works!

The article also mentions:

The Alternate Plan could be adopted today by the six million public employees in the U.S.—roughly 25% of the total—who are part of state and local government retirement plans that are outside of Social Security (and are facing serious unfunded liability problems). Unfortunately this option is available only to those six million public employees, since in 1983 Congress barred all others from leaving Social Security. 

Congress has been spending Social Security payroll deductions on other things. That is part of the problem. It is time to take the money out of the hands of Congress and give it back to the people it belongs to.

Maybe Rick Perry knows what he is talking about when it comes to Social Security–opting out of Social Security has worked in Texas!

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29 thoughts on “What Happens If You Opt Out Of Social Security ?

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