A New Deal

Social Security isn’t just underfunded—it’s backwards. What if we did the exact opposite?

America runs the most expensive retirement program in human history—$1.3 trillion a year—to ensure our elderly don’t starve. I’d ask you to forget for a minute that they’re not starving. In fact, people’s average net worth is typically at its highest when they retire, so you should also ignore that we’re talking about a program that transfers money to the most asset-established cohort in the country. Set aside the small detail that we actually pay people more the more they earned in their career—and thus the more able they were to save. And please bracket, if you would, the fact that the $1.3T isn’t conjured out of ether. That it, in actuality, is the confiscated earnings of young workers, most of whom are still carrying student loan debt and don’t yet own a home.

But set that aside. It’s unimportant. It would be inhumane to do anything other than to take from workers and give to people who have had sixty-plus years to build and plan their lives.

The real question we should be asking is: are we doing it well?

The Backwards Logic of Inter-Generational Transfers

Social Security’s “Old Age & Survivors Insurance” (OASI) operates on a premise so backwards that were it a private company, it would be illegal. The money paid in is always paid right back out to people higher up on the pyramid. And the problem, as is the case with all pyramid schemes, is that you always need another, larger generation to follow. And we’re running out of those.

In 1950, there were 16.5 workers per retiree. Today it’s 2.7. By 2036, it will be 2.3. The math doesn’t get better from there. It gets worse, because we’ve spent the last fifty years systematically preventing the next generation from forming families by confiscating the capital they’d need to do so.

The system was designed for a population pyramid that no longer exists. When Social Security launched, life expectancy at birth was 61 and retirement age was 65. Today, life expectancy is 78. People collect for thirteen years on average, often longer. So we have more retirees, living for longer, with fewer relative workers in each subsequent generation. The actuarial assumptions that made the system remotely workable have been obsolete for decades.

But we don’t talk about this honestly, because every single part is radioactive to someone. Saying we need a higher birthrate is undermining women’s choice. Saying the system needs major reform is violating the social agreement with current retirees. And besides, nobody wants to take Grandma’s pension. Or piss off AARP’s lobbyists.

The Reform That Isn’t

But let’s talk about reform. Means-testing is the one that everyone loves because it sounds reasonable: why should we send checks to millionaires? If Warren Buffett doesn’t need Social Security, why are we paying him?

Fair question. Let’s run the numbers.

Even if you zeroed out benefits for the “wealthy” retirees—pick your cutoff, call it $1M in assets if you want—the savings are a slice, not a solution. You’re trimming at the margins of a $1.3 trillion program. Best case you buy yourself time. You don’t change the underlying math, you just slow the rate at which it blows up.

But unfortunately, means-testing doesn’t just fail to solve the problem—it actually makes it worse. In a means-tested program, we’ll have created a system where a lifetime of saving and investing gets you... nothing. The couple who scrimped and invested and built their way to $1.2 million gets zero benefits. Their neighbors who spent everything and arrived at retirement with $400,000 get full benefits.

You’ve just turned Social Security into a tax on responsibility. Save for retirement? Congratulations, you lose your benefits. Spend everything? Don’t worry, we’ll take care of you. The incentive structure is precisely backwards.

And here’s the awkward bit: those “wealthy retirees” we’re means-testing? They paid in the same 12.4% for forty years. Except now they get nothing back because they committed the sin of being financially responsible. That’s not a retirement program anymore—it’s punitive.

But this reveals the deeper problem. Whatever reform we discuss—means-testing, raising the retirement age, increasing payroll taxes—accepts the fundamental premise: we should confiscate money from young workers and transfer it to old retirees. We’re just arguing about the details.

What if the premise itself is wrong?

What If We’re Doing It Backwards?

Here’s a thought experiment: what if instead of confiscating money from twenty-five-year-olds to give to seventy-year-olds, we did the opposite?

Contribute to a trust account from birth to age 25. At current Social Security spending levels, that’s roughly $12,500 a year¹. Compound at market rates. At 25, the account pays out approximately $685,000². That’s your retirement stake. No more entitlement promises. You’re done.

Take that $685,000 and use $100,000 for a 20% downpayment on a house. Pay off your student loans with another $100,000. Invest the remaining $485,000. By retirement at 65, that $485,000 becomes $5 million at 6% real returns. The house doubles to $1,000,000 or more. The mortgage gets paid off at 55, freeing up $2,400 monthly that you invest for the final decade—another $400,000. Add in $500 a month in extra savings from eliminating the student loans, which by retirement has compounded to an additional $900,000. Total savings at retirement: $6.3 million. Plus a paid-off, million-dollar house. So, $7.3 million, including the home. Regardless of what you choose to do for a living.

Compare that to current reality: confiscate 12.4% of income for forty years, manage it at 2% real returns, deliver roughly $500,000 in present value through monthly checks in old age. And you’re still making mortgage and student loan payments in your 70s.

The differential isn’t close. Front-loading the capital delivers 14 times the wealth. And that’s before accounting for the lifetime of economic stability, earlier family formation, and actual independence that capital ownership enables.

This isn’t theory. It’s compound interest. The difference between giving someone capital at 25 versus 65 is the difference between forty years of compounding and zero years of compounding. It’s the difference between building wealth and destroying it.

So why are we destroying wealth?

The System Needs You Poor

Because a twenty-five-year-old with $685,000 is disruptive.

Not to themselves. To everything built around the assumption that most people won’t have capital until they’re old—if they ever do. A population with real assets at 25 doesn’t need politicians promising to “protect” their retirement. They don’t need AARP lobbyists to fight over benefit formulas. They don’t need a lifetime of payroll withholding as the price of not becoming destitute. They’re economically harder to corner. They have options. And options are the one thing institutions never voluntarily hand out.

That’s the part nobody says plainly: the current system doesn’t just fail to create wealth—it delays it past the window when it matters. It takes money out of the exact years when compounding turns a small edge into independence, and redirects it into consumption at the end of life. Same burden. Worse timing. Worse outcomes. It’s not that Social Security administrators can’t do the math. It’s that the math isn’t the only thing being optimized.

AARP is a massive political force because retirement dependence is a massive political constituency. When people are living check-to-check at 70, “protect Social Security” is a credible promise and a powerful lever. When people have capital instead of dependency, that lever weakens. The politics changes. The bargaining power changes. “Vote for me or your check gets cut” stops working when the check is no longer your lifeline.

And it’s not just politics. Whole sectors are adapted to a world where people rent longer, carry mortgages longer, and can’t risk walking away from a job. Financial products, HR policies, even workplace culture—everything assumes most workers need the next paycheck more than they need dignity. Give people capital early and you change behavior: less desperation, more mobility, more entrepreneurship, more willingness to say no.

None of this requires a smoky-room conspiracy. It’s path dependence and incentives. We built an economy around delayed ownership. A system that front-loads capital doesn’t just improve retirement. It rewires the leverage structure of American life. That’s why it’s not on the menu.

On Responsibility

Somewhere a Boomer is having a heart attack while reading this. “But they’ll squander it! We can’t trust a 25-year old with that much money!” Right. We can trust them to vote, buy a gun, drink alcohol, drive, join the military, and take on a quarter-million in student loan debt for a gender-studies degree, but you’re right, we can’t trust them with capital. They’ll squander it. Unlike the alternative, where the government squanders it before they even have a chance. Unlike the status quo, where birthrates are collapsing and there aren’t enough workers to cover retirees and the program hits reserve depletion in 2033. So very unlike the government’s deficit spending, and currency debasement, and fiscal doom loop, all managed into the ground by our wise, octogenarian elders.

You know what? I’ll take my chances on the kids.

The Transition

The mechanics aren’t complex. New workers get trust accounts from birth. The 12.4% payroll tax (plus employer matching) that currently funds Social Security gets redirected into those accounts instead. Contribute $12,500 annually for 25 years, compound at market rates, pay out at 25. Same tax burden for employers and employees. Different destination. 14x better outcome.

The real question is what we do with current retirees and current workers. And here’s the thing everyone misses: we’re already planning to spend this money.

Social Security isn’t some optional program we might fund if the budget allows. It’s a legal obligation to both current retirees and everyone who’s been paying in. We’re on the hook for those dollars whether we reform the system or not. The transition just changes the timing—we pay current retirees what we promised them while simultaneously capitalizing the next generation’s accounts.

Yes, for one generation you’re double-paying. That’s the cost of getting out of a pyramid scheme without defaulting on our promises. But we were always going to spend those dollars. The alternative is pretending the current system is sustainable when we know it hits reserve depletion in under a decade. At that point we either break promises to retirees, massively raise taxes on workers, or borrow even more. Pick your poison—they’re all more expensive than an honest transition.

Some modest reforms help during the crossover: phase in means-testing between $1-5M in assets, modestly raise retirement age for those 15+ years out, gradually trim benefit growth rates. These buy time and reduce the double-payment burden without breaking faith with people who planned around current rules.

The math is manageable because the expensive part is temporary. Current retirees age out. Once the transition completes, you’re funding $1.3 trillion in trust accounts instead of $1.3 trillion in benefit payments—but now you’re building actual wealth instead of perpetual dependency. Same cost, 14x better outcome, and a system that doesn’t require exponential population growth to stay solvent.

We’re going to spend the money either way. The only question is whether we keep pouring it into a demonstrably failing pyramid scheme, or redirect it toward something that actually works.

1. $1.3 trillion / 104 million Americans between ages 0-25 = $12,500/person/year

2. $12,500 per year, for 25 years, compounding at 6% annually.