I was thinking about social security, and I stumbled across I scenario I would like to share. Picture a young couple (mid-twenties). Both are educated, so one of them lands a decent job making about $40k a year with the possibility of promotions for good service. The other half takes a decent job too. About five years into the relationship, promotions start to happen for one of them, so the other decides to stay at home. About this time they have their first child. About ten years into the relationship, the professional half of the couple is killed in a car wreck on the way home. This leaves a widow and a five year old child. The couple had insurance through the professional's employment which gives the widow one times the annual salary, which is now around $60,000 a year. The widow also has access to his 401K (which after ten years is vested and worth at least $50k). The widow pays off the family home and decides to start looking for work, until a family friend reminds her she is entitled to social security benefits.

Social security benefits apply to (as well as others):

• A widow or widower of the worker, any age, with a child under age 16.
• A child of the worker, until age 18.

Both the widow and the child are entitled to 75% of the worker's benefit or "primary insurance amount" (hereinafter, PIA). Family income from social security is limited to 150-180% of the worker's PIA, dependant upon some conditions (which I could not easily find). The question now becomes how do you calculate PIA. For this scenario, it is a 3-point process that isn't that tricky. First we need to know the worker's average monthly income. Over ten years from $40k to $60k, we will assume an average income of $50k (US median houshold income is around $47k). This makes the average monthly income of $4,167. The following chart explains the rest:

PIA Calculation	PIA Amount
0-$680 a month; 90%	$612.00
$680-$4,100 a month; 32%	$1094.00
Over $4,100 a month, 15%	$10.00

   Total PIA = $1716.00

This means for the next ten to eleven years the widow is entitled to 75% of $1716, and for the next twelve to thirteen years the child is entitled to 75% of $1716. The total household income is $2574 a month, or $30888 a year. Only a small fraction of which, if any, is taxable.

Over the next ten years, the widow will receive over $150,000 total, in addition to the child's $180,000 total over the next twelve years. That is a $330,000+ family payout.

And what did the deceased spouse contribute to social security? The social security tax is 12.4% This is split between the employer and employee equally. At 12.4% and an average income of $50,000, total contributions equal $62,000 ($31,000 of which can be contributed to the spouse). What a rate of return for the widow and the child!

Around 50 million people a year receive social security benefits, and about 14% of these are survivor beneficiaries (7 million people). At an average US household income of $47k, that is over $100 billion a year we are shelling out for survivor benefits.

It is projected in the next ten years, the burn starts to equal the supply. Within twenty years, the federal government has to start paying back the excess social security loans (surplus is always given to the government in the form of loans) with interest. What do you want to bet the social security tax is raised?

Now would someone please explain to me why I can't have my 6.2% back to invest myself, and my employer can't have it's 6.2% back (to possibly pay me a little more)?

Why should my money go to pay a widow's benefits that look more like winning the lottery than a little push in the right direction?