The Refund
The government made a promise it can't keep. Pay it off instead.
Social Security should be completely dissolved. Every dollar taken from every worker who ever paid into it should be returned, with interest, and the program should end. Not reformed. Not means-tested into something smaller. Ended, with the people who funded it made whole, and the responsibility for old age handed back to where it belongs: individuals, families, and the voluntary institutions communities build when government stops doing the job for them.
This is not a proposal to cut benefits. It is a proposal to pay people back what was taken from them and stop taking more. The distinction matters because most Social Security debates are fought over how to keep the machine running a little longer. This one is about turning the machine off and giving people back their money.
The case rests on four claims, each of which can be checked against public record. First, the program is not solvent and cannot be made solvent without either cutting benefits or raising taxes indefinitely, because its finances were built on a structure that requires each generation to be larger and richer than the last. Second, the “trust fund” that supposedly backs your benefit is not a fund in any ordinary sense. It holds no real assets, only government IOUs to itself. Third, you have no legal claim to what you paid in. The Supreme Court settled that question in 1960, and nobody has revisited it since. Fourth, there is a working example of what happens when a community walks away from this system and builds its own. It has been running for over forty years, across three counties in Texas, and it beats Social Security on almost every measurable dimension.
It is worth being precise about what kind of argument this is, because Social Security debates usually collapse into two camps shouting past each other: one insisting the program is sacred and untouchable, the other insisting it is a fraud that should simply vanish along with whatever anyone put into it. Neither position survives contact with the actual numbers. The program is not sacred because Congress has already changed it unilaterally more than once, and the Supreme Court has already ruled that contributors have no legal claim preventing that. It is also not a fraud in the sense that the money simply disappears with nobody accountable for it; it is a tax, spent as promised on the people it was collected from, run on a financing structure that arithmetic has caught up with. The people who paid into that structure for thirty or forty years are owed an honest reckoning, not a shrug. A refund is that reckoning. It treats the money as a debt the government owes its citizens, not a gift the government is free to shrink whenever convenient, and it pays that debt off instead of letting it compound into a larger political crisis with each passing decade.
None of this requires pretending the program did nothing good. It kept millions of elderly Americans out of poverty for ninety years. That is a real accomplishment, and it deserves to be stated plainly before anything else is said. But an accomplishment bought by making promises the money cannot keep is not a program. It is a bet, placed by one generation and called due on the next, and someone eventually has to stop rolling it over.
What Social Security actually is
Start with the plainest fact about the program: it does not save your money. Payroll taxes collected this year pay benefits owed this year. Nothing is invested, nothing compounds, nothing sits in an account with your name on it. The money you paid in 2010 was spent in 2010 on someone else’s retirement check. The money you pay this year will be spent this year, on someone else’s. This is called pay-as-you-go financing, and it is the single most important fact about the program, because it means Social Security’s solvency depends entirely on enough working-age people paying in to cover the retirees drawing out.
For the first several decades, that ratio was overwhelming. In 1950, roughly 16 workers were paying into the system for every one person drawing benefits. That ratio is now under three to one and is heading toward two to one within the working lifetimes of people currently in their thirties. Nobody engineered this collapse. It is simple demographics: people live longer, birth rates fell, and the payer-to-recipient ratio that made the arithmetic work in 1950 is gone and is not coming back.
The people who designed the program in 1935 understood this was a wager on population growth, even if the public framing has always obscured it. Every early beneficiary got a windfall. Ida May Fuller, the first person ever to receive a monthly Social Security check, paid in about $24 over three years of work before Congress cut her first check in January 1940. She lived to ninety-nine and collected tens of thousands of dollars over her lifetime. That was not fraud. It was the design. Somebody has to be first, and being first under a pay-as-you-go system means getting benefits nobody paid for. The problem is that the debt created by that first generation’s windfall never went away. It got passed down, and it grows every year Congress declines to address it, and today’s payroll tax still carries a piece of that original 1935 bill. The Center for Retirement Research at Boston College estimates that roughly three percentage points of the current 12.4 percent payroll tax rate exist purely to cover legacy costs from benefits paid decades ago that were never funded by the recipients who got them.
So when you hear that Social Security has a “trust fund,” understand what that word is doing. The Old-Age and Survivors Insurance and Disability Insurance trust funds hold Treasury securities: special-issue government bonds that represent money the government already spent on other things and now owes back to itself. There is no vault. There is no diversified portfolio. There is an accounting entry that says the federal government owes the Social Security Administration a certain amount of money, and the only way to make good on that IOU is to raise taxes, cut spending elsewhere, or borrow more. The 2026 Trustees Report puts the combined balance of those funds at $2.56 trillion, down $160 billion in a single year, because the program is now paying out more than it collects. That combined fund, OASI and DI together, is projected to run dry in the third quarter of 2034. Considered on its own, which is how the law actually treats it, the OASI fund that pays retirement and survivor benefits is projected to be depleted in the fourth quarter of 2032, six years from today.
This is worth sitting with because the word “trust fund” is doing a great deal of rhetorical work that the underlying accounting does not support. When workers pay payroll tax, the Treasury does not set that money aside in any segregated account, invest it in a diversified portfolio, or hold it in reserve against future claims the way a private pension fund or insurance company is legally required to. It spends the money immediately, on current benefit checks and, historically, on whatever else the federal government was spending money on that year, and in exchange credits the trust fund with a special-issue Treasury bond representing an IOU from the general government to the Social Security Administration. That bond earns interest, on paper, but redeeming it to pay a benefit does not create new money. It requires the Treasury to raise the cash some other way: new taxes, new borrowing, or cuts elsewhere in the federal budget. A trust fund that must be refinanced through general taxation or new debt issuance every time it is drawn down is not a fund in the sense any ordinary saver would recognize. It is an accounting fiction layered over a pay-as-you-go tax, and the fiction becomes visible the moment the fund’s balance actually reaches zero, which the trustees themselves now say will happen for the OASI fund in six years.
Depletion does not mean the checks stop. It means the checks get cut automatically, by law, down to whatever level incoming payroll taxes can cover without borrowing. The trustees project that level at 78 percent of scheduled benefits once OASI alone runs dry, or 83 percent if Congress combines OASI with the healthier disability fund, an accounting maneuver that requires new legislation and currently has no legal basis. Either way, the math is the math: the average monthly retirement benefit projected for 2026 is $2,071. A 22 percent cut against that number is roughly $455 a month, gone, from people who are already retired and have no way to make up the difference by going back to work. The Committee for a Responsible Federal Budget has run the state-by-state numbers and found the losses exceed that average in twenty-nine states.
Congress has known this date was coming since at least the early 2010s, when trustees were already projecting depletion somewhere between 2033 and 2036. Every year of inaction narrows the range of fixes and increases the size of whichever fix eventually gets forced through. The Bipartisan Policy Center puts the 75-year shortfall at roughly $30.3 trillion, up from $26 trillion the year before, driven partly by a 2025 tax law that reduced the income-tax revenue flowing into the trust fund from benefit taxation, and partly by demographic assumptions that keep getting revised downward as fertility and net immigration come in lower than projected. The honest way to describe a $30 trillion, 75-year financing gap is that the program as currently structured cannot pay what it has promised, under any set of assumptions anyone currently considers plausible. Fixing it requires some combination of higher payroll taxes, a higher taxable wage ceiling, delayed retirement ages, reduced cost-of-living adjustments, or reduced initial benefits. Every one of those fixes takes money from someone who was told a different number.
The money was never yours to get back
Here is the part of the program most people do not know until it is too late to matter to them personally. In 1960, the Supreme Court decided a case called Flemming v. Nestor. Ephram Nestor had worked in the United States and paid into Social Security for nineteen years. He was deported after the government learned of his past Communist Party membership, and Congress had passed a law stripping benefits from deported individuals in that category. Nestor sued, arguing that stopping his payments after nineteen years of contributions violated his property rights. He lost. The Court held that Social Security taxes are not premiums on an insurance contract and Social Security benefits are not an earned annuity. Contributors have no accrued property right to what they paid in. Congress retains, by explicit statute, the power to amend or repeal the benefit schedule at any time, for any reason, and no contributor has legal recourse when it does.
Nothing has overturned that ruling in the sixty-six years since. It remains the controlling precedent. Every dollar withheld from every paycheck under FICA is, legally, a tax like any other tax, spent by the government like any other tax revenue, and the benefit schedule you were promised is a statutory privilege Congress can change without your consent and without compensating you. You cannot sue for breach of contract because there is no contract. You cannot claim the payments as property because the Court has already ruled they are not property. The entire moral case for keeping Social Security running exactly as promised rests on a promise that has no legal force whatsoever, and the entire practical history of the program is Congress exercising exactly the power Flemming v. Nestor confirmed it holds: raising the retirement age in 1983, taxing benefits for the first time that same year, and adjusting the earnings formula repeatedly since. The program has already been changed unilaterally, multiple times, on people who had no say in the matter and no legal ground to object.
The 1983 amendments are the clearest illustration of that power actually being used against people who had no say in the matter. Facing an immediate solvency crisis, Congress raised the full retirement age in stages from 65 to 67, a change that fell on younger workers who had spent their entire working lives paying in under the assumption of an earlier retirement date. The same package subjected Social Security benefits to federal income tax for the first time in the program’s history, a direct reduction in net benefits for retirees who had never been told, when they were paying in decades earlier, that the government would later tax the very payments it owed them. Both changes were upheld without difficulty because Flemming v. Nestor had already settled that Congress retained the authority to do exactly this. Nobody who paid into the system between 1935 and 1983 was asked whether they consented to a later retirement age or a new tax on their benefits. The changes were simply made, and every dollar collected before those changes had already been spent on someone else’s check, so there was no account balance to point to and no legal claim to assert against the change. That is precisely the vulnerability a refund eliminates. An account balance calculated and distributed today cannot be retroactively taxed away or reduced by a future Congress the way a promised future benefit can, because once distributed, it is the recipient’s own asset, not a line item in next year’s federal budget debate.
Once that fact is on the table, the sentimental argument for preserving the program as an inviolable promise collapses. It was never a promise the law recognized as binding. It was and is a tax-funded transfer program that Congress can adjust, cut, or eliminate at will. The only question left is what happens to the people who paid the tax.
What refunding actually means
That question has an answer, and it is the actual proposal here, not an abstraction. Every worker who has paid FICA taxes into the OASDI system has a wage record. The Social Security Administration already maintains this record for every covered worker in the country, because it is the same record used to calculate benefits under current law. That record, converted into a lifetime running total of contributions with a reasonable rate of return applied, is the basis for a refund.
The mechanics: take each worker’s cumulative payroll tax contributions, employee and employer share combined, since they entered the workforce. Apply a conservative real rate of return, the same 4.8 to 4.9 percent nominal historical return the trust fund itself has earned on its Treasury securities since 1981, according to the Social Security Administration’s own comparative data. That produces a defensible, non-arbitrary account balance for every worker in the country, calculated using the government’s own numbers and the government’s own historical rate of return assumption, not an inflated market projection designed to make the refund look generous. Distribute that balance as a lump sum or, for anyone who wants predictable monthly income instead, an annuitized payout purchased on the open insurance market. Wind down the trust funds, which currently hold $2.56 trillion in Treasury obligations, using that balance as a down payment against the total refund liability, and finance the remainder the same way the government finances every other long-term obligation: bond issuance retired over a multi-decade horizon, exactly as the $30.3 trillion unfunded shortfall would otherwise have to be financed anyway, except this time the money goes to the people who earned it instead of disappearing into a formula nobody controls.
A workable transition needs to run in defined cohorts rather than all at once, both to protect people who built their retirement plans around the current formula and to let the bond market absorb the financing without disruption. A reasonable structure looks like this. Cohort one covers everyone already receiving benefits and everyone within ten years of full retirement age at the time the law passes. This group is paid out under the current benefit formula, in full, for life, funded first from the existing $2.56 trillion trust fund balance and then from a dedicated, ring-fenced bond issue specifically earmarked for this purpose. Nothing changes for them except that their benefit is now backed by a specific, funded obligation rather than an annual appropriations fight and a 2032 depletion date. Cohort two covers everyone between 10 and 30 years from retirement. Their wage records are converted into an account balance using their actual lifetime contributions plus the historical trust fund rate of return, and they choose between an immediate lump sum, a rollover into a qualified private annuity, or a phased distribution timed to their expected retirement date, whichever suits their own planning. Cohort three, everyone more than thirty years from retirement, gets the same account-balance calculation applied going forward on a rolling basis, with the option to take an early partial distribution or let the balance continue accruing interest until they choose to draw it down, but crucially, no new payroll tax is collected from this cohort once the transition begins. The tax disappears from their paycheck permanently, and any future retirement savings are theirs to direct, whether into a private annuity, an employer plan, a mutual aid association, or nothing at all, at their own risk and their own choice.
Administratively, none of this requires inventing new infrastructure. The Social Security Administration already maintains the wage record for every covered worker in the country, because that record is the same one used to calculate benefits under current law. The same actuarial staff that currently projects trust fund depletion dates can calculate account balances using the same wage histories, the same rate-of-return assumptions the trustees already publish, and existing statutory formulas adapted to a lump-sum context rather than an annuity schedule. This is not asking the government to build a system from nothing. It is asking the government to run the calculation it already runs, output the result differently, and then close the books instead of reopening them every year with a new Trustees Report.
This is not free. Nobody serious claims it is. But compare it honestly to the alternative, which is also not free. The $30.3 trillion actuarial shortfall already documented in the 2026 Trustees Report has to be paid somehow, by somebody, under current law, regardless of what anyone does. Congress can pay for it through higher payroll taxes on workers who will retire into a smaller, less generous, means-tested version of the same program. Or the country can pay a comparable amount as a one-time refund, put the account balances directly into the hands of the people the money came from, and end the recurring 12.4 percent tax obligation on every paycheck in America going forward. One version of that bill produces an entitlement program that keeps shrinking every decade Congress fails to act. The other version produces a closed transaction and the largest one-time transfer of financial independence in American history.
The remedy needs a transition structure, not a cliff, and this is where most privatization proposals fail politically because they try to change everything at once. Anyone currently receiving benefits, and anyone within ten years of full retirement age, should be paid out under the current benefit formula, in full, funded first from the existing trust fund balance and then from a dedicated bond issue, because those people built their retirement plans around a specific number and changing that number on short notice is the kind of unilateral rug-pull the program itself has already been guilty of and should not repeat. Everyone else gets the lump-sum or annuitized refund of their actual contributions plus historical return, calculated off their existing wage record, distributed over a phased schedule so the bond market can absorb the issuance without a shock. The payroll tax ends the moment a worker’s transition cohort is fully refunded. No new contributions are collected from that point forward. The tax disappears from paychecks permanently, not just for the people cashed out, but for every future worker who will never pay into a program that no longer exists.
What replaces it
The honest objection to all of this is not the math. It is the fear of what happens to people who take their refund, spend it or invest it badly, and arrive at seventy with nothing. That fear is legitimate, and it deserves a real answer, not a dismissal.
The real answer is that retirement security has never actually depended on a single federal check, and treating it as though it does is precisely the habit that has left Americans more financially fragile, not less. Communities met this need before 1935 and can meet it again, more effectively, because they are not bound by a formula designed for a demographic pyramid that no longer exists.
Fraternal and mutual aid societies did exactly this job for the better part of a century before Social Security existed. By 1920, according to a 1933 federal research committee report, one in three adult American men belonged to a fraternal society. At the movement’s peak in the early twentieth century, these organizations insured roughly 40 million Americans, more than the total population of the entire country at the time of the Civil War, according to figures the American Fraternal Alliance has drawn from congressional testimony and historical enrollment records. The Odd Fellows, the Knights of Pythias, the Ancient Order of United Workmen, and hundreds of ethnic and religious mutual benefit societies built what historian David Beito, in his definitive study of the movement, describes as a genuine parallel welfare state: hospitals, orphanages, homes for the elderly, sick leave, and life insurance, all funded entirely through member dues, all governed by the members who paid them, with no tax collector and no federal formula involved anywhere in the arrangement. These were not charities handing down aid to passive recipients. They were reciprocal institutions built by working-class and immigrant families for themselves, cutting across race, class, and gender lines in ways their reputation as exclusive men’s clubs obscures. The movement declined for exactly the reason the historical record shows: Social Security, employer-provided group insurance, and the GI Bill reduced the financial urgency that had made fraternal membership a necessity rather than a nostalgia. Take away the tax-funded federal substitute, and the underlying need for mutual aid does not disappear. Neither, on the evidence of the roughly 9 million Americans still carrying $380 billion of in-force life insurance through fraternal benefit societies today, has the institutional form entirely disappeared either. It shrank because the government crowded it out, not because it failed at the job.
Credit unions operate on that same principle today: member-owned, member-governed, no shareholders extracting a cut, existing purely to serve the people who fund them. Nothing about either model requires a federal mandate. It requires people choosing to pool risk voluntarily instead of being taxed involuntarily, and it requires the money that would otherwise go to payroll tax to actually stay in a worker’s pocket long enough to be pooled.
The private insurance market already prices exactly the products a refunded worker would need: fixed annuities that convert a lump sum into guaranteed lifetime monthly income, at rates that are transparent, competitive, and shopped across multiple insurers instead of dictated by a single government formula nobody can negotiate. A worker who takes a refund and rolls it directly into a private annuity has purchased the same guaranteed income stream Social Security claims to provide, except backed by an insurer under state regulatory reserve requirements instead of a pay-as-you-go tax on a shrinking pool of future workers. That worker’s benefit is not subject to a 22 percent statutory haircut in 2032 because Congress failed to act. It is a contract, with the accrued property right, Flemming v. Nestor confirmed that Social Security itself does not provide.
For the genuinely vulnerable, the elderly who outlive their savings through bad luck, illness, or family collapse, the correct backstop is not a universal payroll tax on every worker in the country. It is the same layered structure that has always caught people who fall through the cracks of formal systems: family responsibility first, church and community mutual aid second, and a narrow, means-tested residual safety net funded through general revenue and administered close to the people it serves, not a national bureaucracy managing a quarter of the federal budget. This is a smaller, more targeted commitment than what exists today, and it should be. A safety net designed to catch people who actually fall is a fundamentally different and cheaper thing than an entitlement that writes a check to every retiree regardless of need, funded by taxing every paycheck in the country for ninety years running.
The bureaucracy running it
Set the financing question aside for a moment and look at how the program is actually administered, because a promise is only as good as the institution executing it, and the institution has been struggling. As of early 2025, applicants for disability benefits were waiting an average of seven months just to get an eligibility determination, and appeals of denied claims routinely stretched into years. Reporting from early 2026 found the agency was still sitting on more than two million pending disability claims even after a year of improvement efforts, and internal processing centers were carrying millions of pending actions at any given time. SSA’s own blog acknowledged that the agency’s operating budget had shrunk to under one percent of the benefits it pays out, and that four straight years of funding below what the agency requested had driven a 94 percent increase in pending disability claims and tripled the wait time on the toll-free phone line before recent fixes began to claw some of that back.
The agency has since reported real, measurable improvement: wait times on the national phone line down sharply, the disability backlog reduced by roughly a third, hearing wait times cut by months. Credit where it belongs. But independent researchers examining the changes in 2026 found that the fixes leaned heavily on pushing claimants toward AI-driven phone trees and online-only account management, and flagged that this made the system harder to use, not easier, for exactly the population least equipped to navigate it: people with cognitive or psychiatric disabilities, older applicants without reliable internet access, and rural claimants losing access to local field offices as the agency centralizes operations. Watchdog groups have also noted that the agency stopped publishing some of the specific customer-service metrics, like hold times and appointment lead times, that would let the public verify the improvement independently.
None of this is a scandal in the sense of anyone stealing money. It is the ordinary, predictable result of running retirement security for over seventy million Americans through a single centralized federal bureaucracy that answers to Congress’s appropriations schedule rather than to the people depending on it. A worker with a real account at a private insurer or a mutual aid association does not wait seven months for an answer about their own money, because there is no single national queue for them to sit in. Decentralizing retirement security away from one federal agency does not just reduce financial risk. It removes a chokepoint that, on the current record, tens of thousands of disabled and elderly Americans are stuck behind right now, waiting for a bureaucracy to get to their file.
The Galveston evidence
None of this is theoretical. In January 1981, employees of Galveston County, Texas, along with neighboring Matagorda and Brazoria counties, voted to leave Social Security entirely and adopt a private alternative, a window in the law that existed for local government employees until Congress closed it in 1983. Galveston’s own workers voted for it by a margin of roughly three to one. The plan that resulted, commonly called the Alternate Plan, is not what most people picture when they hear “privatize Social Security.” Contributions are pooled, not held in individual brokerage accounts, and invested by the county through group annuity contracts rather than the stock market, specifically to avoid market volatility. Workers do not pick their own investments. The plan is, in the words of the analysts who have studied it since, a banking model rather than an investment model, deliberately conservative.
It has run for over forty years, and the results are not close. Financial planner Rick Gornto, who designed the plan, reported an average annual return of about 6.5 percent over its first twenty-four years. A Government Accountability Office and Social Security Administration joint review from 1999 found the plan’s returns averaged 4.62 percent real, essentially identical to the 4.88 percent real return the Social Security trust fund itself earned over the same 1981 to 1997 period, which is exactly what you would expect since both are conservative, low-risk investment vehicles rather than an aggressive equities play. The benefit comparisons are where Galveston pulls ahead. Using the plan administrator’s own retirement calculations, a worker earning $17,000 a year would draw about $1,036 a month under the Alternate Plan versus $683 under Social Security. A worker earning $51,000 would draw $3,103 versus $1,368. A worker earning $75,000 or more would draw roughly $4,540 versus $1,645. The death benefit under the Galveston plan pays four times the annual salary, up to $215,000, against Social Security’s fixed $255 lump sum, a number that has not been adjusted since 1954 and today covers a rounding error’s worth of funeral costs.
Critics of the Galveston comparison, including analysts at the Center for Retirement Research and the Center on Budget and Policy Priorities, raise fair points that deserve to be stated rather than waved away. The Galveston plan does not adjust for inflation the way Social Security’s cost-of-living formula does, so its advantage narrows over a long retirement. It offers no spousal or dependent benefits structured the way Social Security’s are. Participation was mandatory for county employees, meaning nobody in Galveston had the option to stay in Social Security instead, which is a legitimate point against holding Galveston up as evidence that individual choice produces good outcomes; the good outcomes there came from a well-designed collective plan, not individual investors picking stocks. And Galveston’s three counties are, relative to the national program, small: only about five thousand employees are covered, so the county walked away from Social Security without being asked to shoulder any of the legacy costs the rest of the country still carries, which is precisely the kind of transition-cost problem any national-scale wind-down has to solve honestly rather than assume away. Every one of these objections is correct, and every one of them describes a design detail to fix in a national plan, an inflation-adjustment mechanism, an optional survivor annuity rider, a properly financed transition, not a reason the underlying approach fails. Galveston proves the model works when it is designed conservatively and administered honestly. It does not prove every implementation detail transfers automatically to national scale, and nobody advocating for this should pretend otherwise.
What Galveston does prove, unambiguously, is that a community can walk away from Social Security, manage its own retirement money through ordinary financial instruments available to anyone, and produce better outcomes for its workers across every income bracket studied, for over four decades, without a single missed payment. Ray Holbrook, the county judge who led the 1981 effort, put it plainly to reporters thirty years later: people wanted some kind of control over their own money, because ultimately it is their money. That is the entire argument in one sentence.
What other countries did instead
The United States is not the only country that ever had to answer the question of how to fund old age at a national scale, and it is worth looking honestly at what other governments chose, because the range of alternatives is wider than “keep Social Security exactly as is” or “nothing at all.”
Australia replaced reliance on a pay-as-you-go government pension with a mandatory, privately managed, individually owned system called superannuation, introduced in 1992. Employers are required to contribute a fixed percentage of each worker’s ordinary earnings, currently 12 percent, into a superannuation fund the worker actually owns. The money is invested in real assets, equities, bonds, and property, not government IOUs. It compounds for decades before retirement, and the worker can see the account balance at any time, the same way an American checks a 401(k). As of early 2026, Australians hold $4.43 trillion in superannuation assets, more than the size of the entire Australian economy, making Australia the fourth-largest holder of pension fund assets on earth despite having a population smaller than Texas. The Center for Retirement Research at Boston College, hardly a libertarian outlet, has published research asking directly whether the American system should adopt the Australian approach, and rated Australia’s retirement system a full letter grade higher than the American one on the Mercer Global Pension Index, specifically because Australia’s is not sitting on a 2033 depletion cliff.
Singapore built something more comprehensive still. The Central Provident Fund, established in 1955, requires mandatory contributions from both employer and employee, currently running up to 37 percent of wages combined for younger workers, into accounts the individual owns outright. The money is not just a retirement fund. It also finances the worker’s own healthcare costs through a linked medical savings account and can be used to purchase a home. Nobody in Singapore is waiting on a trustees’ report to find out whether their money will still be there when they retire, because the money was never spent on someone else’s benefit check in the first place. It sat in an account with their name on it the entire time.
Chile went furthest of all in 1981, converting its pay-as-you-go government pension system entirely into individually owned accounts, managed by private, competing fund administrators, funded by a mandatory 10 percent contribution from wages. Chile’s pension fund assets grew to over 80 percent of the country’s GDP by 2021, an extraordinary pool of real, individually owned capital that simply does not exist anywhere in the American system, where every dollar collected has already been spent. The Chilean model has drawn real criticism over the years, particularly around whether the mandatory contribution rate was ever set high enough to produce adequate retirement income for lower earners, and Chile itself has revisited and adjusted the system multiple times since 1981. That criticism is worth taking seriously, and it reinforces the point made earlier about needing a properly calibrated, progressive structure rather than a flat percentage that shortchanges the workers who most need retirement security. But the core design choice, that retirement money should be owned by the worker in a real account rather than promised by a formula the government can amend at will, is exactly the choice this proposal asks the United States to make, decades later than Chile, Singapore, and Australia already made it.
The common thread across every one of these systems is ownership. A worker in Sydney, Singapore, or Santiago can look at a statement and see an actual balance, built from actual contributions, invested in actual assets, that belongs to them regardless of what any future legislature decides to do. A worker in the United States has a number the Social Security Administration calculates from a formula, backed by a trust fund holding IOUs from the government to itself, protected by no property right the Supreme Court has ever recognized, and subject to a statutory 22 percent haircut arriving on a specific, published date six years from now. These are not comparably secure arrangements. One of them is ownership. The other is a promise the promisor has already stated, in writing, it cannot fully keep.
The genuine accomplishment, stated honestly
None of the above is an argument that Social Security failed at what it set out to do. It succeeded, for a long time, at the specific job of keeping old people out of destitution, and that accomplishment should be stated in full before moving to what comes next.
Before Social Security, elderly poverty in America was a mass phenomenon, not a residual problem affecting a minority who fell through the cracks. The Census Bureau’s own analysis finds that without Social Security benefits, 37.3 percent of adults 65 and older would fall below the official poverty line today, and the Supplemental Poverty Measure puts that counterfactual figure at 47.1 percent. Social Security moved 28.7 million people out of poverty in 2024 alone, more than any other program in the federal government, and the poverty rate among Social Security beneficiaries specifically has run around 8 percent, a fraction of what it would be absent the program. That is a real, measurable, ninety-year accomplishment, and anyone arguing for dissolution owes it an honest accounting rather than a dismissal.
It is also worth being honest about the current trend, because it complicates the story in the other direction. The elderly poverty rate has been climbing, not falling, in recent years: from 9.5 percent in 2020 to 15 percent in 2024 under the Supplemental Poverty Measure, according to the Census Bureau’s most recent annual report, even with Social Security fully in place and paying out. Roughly 9.2 million older Americans are currently living below the poverty line despite the existence of the very program designed to prevent that outcome. Social Security in its current form is not, in 2026, comprehensively solving the problem it was built to solve. It is preventing a worse outcome while a worse outcome grows anyway, which is a very different thing than the program working as advertised, and it is exactly the kind of gap a targeted, means-tested safety net, administered close to the people who need it, is better positioned to close than a universal transfer program spreading the same finite dollars across everyone regardless of need.
It is also worth remembering that Social Security was never the only tool available for this job, only the one the federal government chose to build and then made mandatory for everyone. Before 1935, and for decades alongside Social Security afterward, the same poverty-reduction function was performed, imperfectly but genuinely, by extended family living arrangements, church and denominational aid, and the fraternal mutual benefit societies described earlier, at a fraction of the fiscal footprint and without a single centralized formula setting the terms for the entire country at once. The claim that only a universal federal program can prevent mass elderly poverty is a claim about the twentieth century’s particular political choices, not a law of economics. Countries that built ownership-based systems instead, Australia and Singapore among them, have not produced worse elderly poverty outcomes than the United States; if anything, an actual owned account balance that grows for forty years gives a retiree more certainty about their own resources than a formula subject to a published depletion date and a congressional horse-trading session every few decades.
The honest reading of both facts together is this: the program did real good work for a long time, the current trajectory shows that work degrading even as the program consumes a growing share of federal spending, and the correct response to a safety net that is both expensive and increasingly inadequate is not to keep funding it at greater cost. It is to redesign the safety net around the people who actually need catching, and return the rest of the money to the people who earned it and can manage it better through private, family, and community mechanisms that do not depend on a fixed national formula written for a population pyramid that stopped existing decades ago.
Objections worth taking seriously
A fair accounting of this proposal requires stating the strongest cases against it, not just the weakest ones.
The strongest objection is the elderly poverty argument already discussed above: without a universal program, some share of retirees will mismanage a lump-sum refund, outlive their annuity choice, or simply never build adequate savings due to low lifetime earnings, and the country will have a population of elderly poor with no federal check standing between them and destitution. This is a real risk, and the honest response is that it requires a genuine, funded, means-tested backstop, not the assumption that family and charity alone will catch everyone. Advocates for dissolution who wave this away are not making a serious argument.
The second objection is distributional. The Urban Institute’s lifetime benefit-and-tax modeling shows that lower-lifetime-earners generally receive substantially more in benefits than they paid in taxes, because the benefit formula is progressive by design, while higher earners often pay in more than they receive back. A flat refund of contributions plus historical interest, without that progressive adjustment, would make many lower-income retirees worse off relative to what current law promises them, even though it would make many middle and upper earners better off. A serious version of this proposal has to either accept that trade-off explicitly or build a progressive top-up into the refund calculation for lower lifetime earners, funded from general revenue rather than payroll tax. Pretending the refund is a pure and simple return of “your own money” for every worker obscures the fact that the current system was never actuarially neutral to begin with, and a straight refund changes who wins and who loses.
The third objection is transition risk. Issuing bonds to finance a refund at anything close to national scale, on top of already refinancing the $30.3 trillion actuarial shortfall the program carries under current law, is a nontrivial addition to federal debt markets, and critics reasonably ask whether that issuance could move interest rates or crowd out other borrowing. The answer is that the $30.3 trillion bill exists regardless of what anyone does about it; the honest comparison is not “refund versus no cost” but “refund financed over decades versus the existing law’s own unfunded liability financed the same way,” and reasonable people can disagree about which financing path is less disruptive, but neither path is free.
A fourth objection concerns counterparty risk. A worker who rolls a lump-sum refund into a private annuity is trading a government promise for an insurance company’s promise, and insurance companies can fail. This is also a fair point, and it is already answered by existing infrastructure rather than requiring anything new: every state maintains a guaranty association that backstops annuity contracts up to statutory coverage limits if an insurer becomes insolvent, the same structure that protects bank deposits through the FDIC, and nothing in this proposal prevents strengthening those state guaranty limits specifically for retirees rolling over Social Security refunds, funded by the insurance industry itself rather than a payroll tax on workers. A regulated private annuity market with real reserve requirements and state-backed guaranty coverage is not a riskless proposition, but it is a fundamentally different kind of risk than a pay-as-you-go transfer program that has already told its participants, in an official government report, the exact year it will fail to pay what it promised.
These objections do not defeat the dissolution case . They define what a responsible version of it has to include: a real backstop for the vulnerable, a progressive adjustment mechanism rather than a flat refund, and a transparent accounting of transition costs instead of a claim that the money appears from nowhere. A proposal that addresses all three honestly is stronger than one that ignores them, and the people who benefit most from Social Security’s current design deserve a case made to them directly rather than assumed away.
The choice is already being made
Every year Congress does not act, it is making a choice, and the choice is not neutral. It is choosing to let the automatic benefit cut hit in 2032 rather than address the shortfall head-on. It is choosing to let a new generation of workers keep paying 12.4 percent of every paycheck into a program that has already told them, through the trustees’ own numbers, that they will not receive full value for it. It is choosing to preserve the appearance of an inviolable promise that the Supreme Court settled in 1960 was never a promise at all in any legal sense.
The alternative is not chaos. It is Galveston, scaled and adjusted for the objections that scaling raises, honestly. It is a wage record the government already keeps, converted into a balance the government already knows how to calculate, paid out to the people who earned it, backstopped by a narrower and better-targeted safety net for those who need real protection instead of a universal check for everyone whether they need it or not. It is the end of a tax that takes 12.4 percent of every paycheck in America to fund a program that a Texas county’s own workers voted, three to one, to leave behind forty-five years ago, and have not looked back since.
The people who built this country’s retirement expectations around a federal formula deserve better than a shrinking check in 2032. They deserve their money back, and the freedom to decide, with their families and their communities, what a secure old age actually looks like. That decision was never the government’s to make in the first place. It is time to give it back.
There is a version of this argument that stops at the math: the trust fund runs dry in 2032, the shortfall runs to $30.3 trillion, the fix requires either higher taxes or lower benefits, so why not simply cash people out and be done with it? That version is true as far as it goes, but it understates what is actually at stake. The deeper failure of the current arrangement is not that the arithmetic is broken. Arithmetic gets fixed all the time, through tax increases, benefit formula changes, retirement age adjustments, the usual toolkit Congress has reached for before and will reach for again. The deeper failure is that an entire country built its expectation of a secure old age around a single federal promise that its own Supreme Court ruled, sixty-six years ago, creates no legal right whatsoever, administered by an agency currently taking seven months to answer a disability claim, financed by a structure that requires every future generation to be larger and richer than the one before it in a country where birth rates have been falling for decades. That is not a temporary shortfall. That is a design built for a demographic reality that no longer exists, propped up by faith in a promise the promisor has already told everyone, in writing, it cannot keep in full.
Galveston County did not wait for Washington to fix that design. Three Texas counties looked at the same arithmetic everyone else was looking at in 1980, and instead of trusting a formula, they built something they controlled themselves, insured through ordinary financial instruments, administered by people accountable to the workers who funded it. Forty-five years later, it has paid every benefit it owes, in every category, to every worker covered, without a depletion date, without a Trustees Report, and without a Supreme Court ruling standing between the workers and their money. That is not a utopian thought experiment. It already happened, it is still happening, and it worked. The only remaining question is whether the rest of the country is willing to learn from it before 2032 arrives, or whether it waits for the checks to shrink first and calls that a plan.