How does your Social Security account compare to investing your money in annuities? Here is an article from BankRate.com that includes a detailed financial analysis that puts Social Security investment in a positive light.

Annuities vs. Social Security

By Jennie L. Phipps · Bankrate.com

Thursday, February 3, 2011

My right-brained, accountant husband stayed home yesterday because it snowed. We started talking about the number of people who attack Social Security as an inefficient retirement fund and insist they could do much better on their own.

Just for the heck of it — because he loves math and me — my hubby unearthed his most recent annual Social Security statement and plugged the numbers into a spreadsheet to test how his accumulated Social Security compares to a conservative investment of the same amount of money outside Social Security. He was surprised to learn that Social Security isn’t such a bad deal after all. Hubby listed his taxable wages beginning in 1963 on the spreadsheet. In the second column, he put the annual percentage of Social Security deducted from his wages — it’s changed over time, from 3.32 percent the first year he paid in to 6.2 percent last year. He calculated his annual contributions and his employers’ annual contributions based on his wages. Then he totaled the contributions.

Next, he assumed that Uncle Sam would invest the money in 30-year Treasuries, and he plugged in interest on the accumulated money based on the Treasury rates, calculating a purchase every six months and reflecting the actual change in rates. Finally, he added up the annual totals and a grand total.

He took that grand total and plugged it into ImmediateAnnuties.com and got a monthly payout for a single male, age 66. He compared that number to what Social Security says he’d get at 66.

According to ImmediateAnnuities.com, he would be able to take his total accumulated savings and purchase an annuity worth $3,427 paid monthly beginning at age 66 for the rest of his life. If he wanted to share the money with me, he could get a joint-lives payout that would pay $2,828 until we both died. There are no inflation adjustments during that time, and when both of us die, the insurance company gets to keep what’s left.

By comparison, Social Security will pay my husband $2,415 monthly beginning at age 66. If I didn’t have my own Social Security, I could claim half of his — $1,207 — for a family total of $3,622. That’s $794 more than the private annuity would pay us. Plus, the Social Security money is indexed for inflation. When one of us dies, the other gets the highest amount of the two payments. When both of us die, the government keeps anything that’s left.

By my lights, Social Security is clearly the better deal.

The Bush administration wanted to partially dismantle Social Security and let people invest at least some of their contributions in the stock market. I haven’t heard much about that plan since the market went south in 2008. But some regular posters here still suggest that they could do better on their own. And maybe they could. But Social Security is a program designed to protect all of us, including those of us who don’t have what it takes to save and invest money on our own. I think that’s a retirement planning blessing.

The National Committee to Preserve Social Security and Medicare has released a new poll  on Americans’ views on Social Security, proposals for raising the retirement age, and cutting benefits. The national telephone poll, conducted June 24-June 30^th by the University of New Hampshire Survey Center, shows a growing disconnect between the average American’s economic priorities and those being debated in Washington.

Poll highlights include:

• Only 2% of Americans believe Social Security is a major cause of the deficit with 77% opposing any changes in Social Security as part of a deficit reduction plan.
• Two out of three Americans (64%) think Social Security provides security and stability to our economy while only 20% see the program as a drain on the economy. 70% believe this recession underscores the critical role Social Security fills for families.
• Virtually all Americans polled (98%) believe Social Security funds belong to the people who contributed them and their beneficiaries and a majority (71%) say Social Security is a promise made to all generations that should not be broken.

Andrew Smith, Director of the University of New Hampshire Survey Center, said he was surprised at the lack of major differences among people of different political persuasions. He said the survey’s responses showed that “Republicans and Democrats alike understand there is a deficit out there and they don’t think Social Security is the cause of it, “

President Obama has formed a Fiscal Committee to look at how to reduce the government deficit.  With Medicare, Social Security, and the Defense budgets totaling 75% of government spending, it looks like Medicare and Social Security are primary targets for deficit hawks.  The Fiscal Committee is scheduled to present its deficit reduction suggestions to the President in December of this year.

Barbara Kennelly, President of the National Committee to Preserve Social Security and Medicare, spoke to the Fiscal Committee last week.  Here are some of her remarks that address Social Security.

You are faced with the difficult mission of finding ways to reduce the deficit.  On behalf of the 3 million members and supporters of the National Committee to Preserve Social Security and Medicare – and millions of other Americans who support Social Security – I am here to urge you:  while you are considering your macro-economics and deficit numbers – please do not lose sight of the millions of individual people whose quality of life depends on every decision you make affecting Social Security.

Many of my points are sometimes forgotten in the face of today’s fiscal crisis.

- More than 9 out of 10 American workers participate in Social Security – thus changes you make in the program will affect virtually every person in this country.

-Today, 52 million Americans receive benefits from Social Security.

But despite its importance to the American people, Social Security is not a generous program and the vast majority of seniors are not wealthy.  They are average Americans who worked hard all their lives.

-Their median income in retirement is just $18,000

-The average Social Security retirement benefit is only $13,800 a year – $11,000 for women.

- And about 40% of the average senior’s Social Security check goes to health care out-of-pocket costs, even with Medicare

I was in Congress in 1983 during the last major Social Security reform.  We made a number of changes designed to fund the benefits of the baby boomers when they began retiring in the early 2000s.

That reform was immensely successful – it extended the programs’ solvency for over half a century.  And the surplus we built was invested in the safest asset possible – Special Issue Treasury Bonds backed by the full faith and credit of the United States.  I know it is customary for some today to disparage the Trust Funds as if they don’t exist.  But those bonds are no different than any other debt instrument issued by the United States government, and I find it incomprehensible that Congress might someday agree to pay back our foreign neighbors before honoring the debt it owes to the American people.

I understand the drive to reduce the deficit – frankly, I’m as appalled by $1.4 Trillion in red ink this year as you are.  But Social Security did not contribute one thin dime to the deficit – it should not be used as a piggy bank to fix the mistakes of the past.

The American people do not support cutting Social Security in order to reduce the deficit.  American workers rightfully see Social Security as their money – not the government’s. It represents their hard-earned dollars that came out of each and every paycheck throughout their working lives.  They are even willing to pay more to strengthen the program for their children and grandchildren.

They flat-out reject the notion that you can strengthen Social Security by cutting it.

Americans want fiscal sanity returned to Washington, but they don’t believe it should be accomplished by cutting Social Security.

Social Security benefit cuts are the last place you should be looking for deficit reduction, not the first place.