Every worker remembers the dread of receiving their first paycheck and seeing just how much Federal and state tax authorities intercept between their gross and net. Federal and state income tax withholding are a part of the withholdings, but another big chunk is for Social Security and Medicare.

The total payment owed on wages is 15.3%, split 50-50 between worker and employer. But what if, instead of the current slush-fund/IOU Social Security system, that 15.3% was put into a retirement account for the employee?

A new policy catching fire is to auto-enroll workers in an employer’s 401k. What if instead we just auto-enrolled employees in a retirement account funded with their Social Security payroll taxes? The account could be as locked down and as inaccessible as the current tax: gone until you hit retirement age.

If you saved no other money, only made $40,000 a year, and we assume a 7% return, you’d have $1.5M at retirement. If we assume the average S&P 500 return of 11%, that account would be worth $5.47M. Those are some pretty good returns.

The average monthly benefit for Social Security retirees is in 2023 was somewhere around $1,700 a month or $20,400 a year. If you lived in retirement for 20 years, from age 65-85, that’d be a total Social Security benefit of $480,000. That’s only $1.02M less than if the money had just been set aside specifically for you.

I’m not sure the best solution for dealing with currently retired and nearly retired workers, but it’s clear that the current system is both unworkable and fundamentally unjust; taxes are taken by force of law at 15.3% of wages and returned at below market rates.

Perhaps a plan that treats adults like grown-ups might work better.