Earlier this week, we published a story and several charts showing that average government spending on each elderly person is $26,355, compared to $11,822 for each child. Almost immediately, readers wrote to condemn us for overlooking what they considered a key issue.
“Your statements as to expenditures on the elderly is specious at best, and at the least, completely misleading,” said one representative letter. “As you point out, most of the government spending on the elderly are Social Security and Medicare payments. These are not payments, but ‘repayments’ of money that we have been forced to hand over to the government to fund a Ponzi scheme during our working lives. It is not expenditures on the elderly — it is a partial refund of money we have been forced to hand over.”
We thought this reader, and others, raised an interesting question: Are Social Security and Medicare payments actually a “partial refund” of what the beneficiary has already paid in? So we took a closer look.
The Urban Institute, a non-partisan research institute in Washington, produces statistics on this topic annually. Institute researchers figured out what people turning 65 in various years have already “paid in” to the system and what can expect to “take out” after they reach age 65. (See our charts below)
Because marital status and family income can significantly affect both the amount paid in and the amount paid out, the institute offers its calculation for various types of family units. To make the final amounts comparable to what might have been done with the tax money had it been invested privately, the institute adjusted all dollar figures at 2 percentage points above the rate of inflation. (The authors note that different assumptions for long-term returns on investment would change the results.)