Social Security and Ponzi Scheme -- a Comparison

To the uninitiated, the United States' Social Security plan may seem like one massive Ponzi scheme. But that's a mistake for many reasons.

First, Ponzi schemes are clearly acts of fraud, while Social Security, which is run by the US government (which enacts federal laws and therefore cannot possibly do anything shady) is, by definition, legitimate.

Second, Ponzi schemes generally pay incredibly high rates of return in very short time periods. However, the returns from Social Security are modest, and they take decades to accrue and mature.

Third, in a Ponzi scheme, participants are given the option to pay into the system, and they may withdraw at any time and keep the profit. On the other hand, every working citizen of the USA is required to pay into the Social Security fund. If a citizen were to attempt to withdraw funds before a certain ripe old age, that investor will forfeit any return on his or her initial investment.

So dear readers, I hope you can see that the United States' Social Security plan differs markedly from a Ponzi scheme because it is legitimate, offers lower rate of return over a much longer term and is mandatory.