I had not realized that some Federal employees did not have to participate in Social Security. Intriguingly, this fact was raised by people who were defending government pay as not being excessive -- they said something like, "well, some workers don't even get Social Security." Via Bryan Caplan
Some government employees don't participate in Social Security. How does that change the benefits picture?
[T]hat's irrelevant because they're neither paying nor receiving benefits. If you follow Social Security, you know it pays a low rate of return... [N]ot to participate in Social Security is actually a benefit, because they're keeping more.
I agree. Not participating in Social Security is a huge benefit. The implicit return on "premiums" paid by you and your employer is typically below zero. In other words, if you took your social security taxes and stuffed them in a mattress, you would get a better return. As I wrote in the link above
as a retirement program, [social security] is a really, really big RIPOFF. Ever worker in this country is being raped by this retirement plan. In fact, it is the worst retirement program in the whole country:
- As we see above, it pays a negative rate of return
- It is not optional "“ you go to prison if you choose not to participate
- Unlike a private annuity contract, the government can rewrite your benefits level any time, and you have to take it. In fact, my statement says "Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2040, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits."
- There are no assets backing this annuity!! An insurance company that wrote annuities without any invested assets backing them would be thrown in jail faster than Jeff Skilling. The government has been doing it for decades.