Why is Social Security Popular?
A Reckoning of What Social Security Costs the Median American, What It Returns, and What He Could Have Had Instead
There is a man we will call Joe. He is not a real person, but he is built entirely out of real numbers, and every one of those numbers is the American average. The point of Joe is that he is unremarkable. He is what the typical working man looks like when you reduce a lifetime of paychecks, deductions, debts, and retirement to a single representative figure. If the system is fair to anyone, it should be fair to Joe, because Joe is the median. He is the person the program was built to serve.
This article does something the program’s defenders rarely do and its complexity quietly discourages. It runs the arithmetic. It asks three plain questions. What did Joe pay into Social Security across his working life? What will he get back? And what would have happened to that same money if the government had never required it of him at all? The answers are not a matter of opinion. They follow from public data published by the Social Security Administration, the Bureau of Labor Statistics, the Federal Reserve, and the United States Treasury. The only opinion in this piece arrives at the very end, and it concerns not the numbers but the question of why a program that performs this way remains so beloved.
A note before we begin. Social Security is currently projected to deplete its primary trust fund in late 2032, after which it could pay only a fraction of scheduled benefits unless Congress acts.¹ For the sake of this analysis we set that aside entirely. We assume Joe receives every dollar he is promised, on schedule, for the rest of his life. We are giving the program its best case. Even on its best case, the numbers tell the story they tell.
Meet Joe
Joe was born in 1959. He turned 18 in 1977, took his first job, and worked without a single interruption for 49 years, retiring at the end of 2025. In June of 2026 he turns 67, which makes him newly eligible for full Social Security retirement benefits.² He is, in every measurable respect, average.
Here are the building blocks of Joe, and the sources behind each one. We will use these same figures throughout.
His earnings. In every year of his career Joe earned the median wage appropriate to a man his age that year — modest in his early twenties, rising through his prime working years in his forties and fifties, easing slightly toward the end. This is not today’s wage projected backward; it is the actual historical wage level for each calendar year, drawn from the Social Security Administration’s national average wage series and shaped by the Bureau of Labor Statistics age-earnings profile for men.³ Joe never once earned enough to reach the Social Security taxable maximum. That is part of what makes him average rather than affluent.
His life expectancy. A 67-year-old American man today is expected to live another 16.11 years, according to the Social Security Administration’s own actuarial life table.⁴ That places Joe’s death partway through 2042, at roughly age 83. We pay his benefits until then.
His debt. Like most American households, Joe carries a revolving credit-card balance. We use the average per-household revolving balance for each year, derived from Federal Reserve data divided by the number of American households.⁵ It is a few hundred dollars in the late 1970s and peaks under ten thousand dollars in recent years — a typical, unremarkable consumer debt load.
His retirement income beyond Social Security. Joe draws the median pension and retirement-account income of Americans his age, about nineteen thousand dollars a year, which matters only for calculating the tax on his benefits.⁶
Everything about Joe is average. His wages are average. His lifespan is average. His debt is average. He is the statistical center of the American working life, and that is the entire point. Whatever the system does to Joe, it does to the typical American.
Part 1 — What Joe Pays, and What He Gets Back
What Joe Pays
Social Security is funded by a payroll tax. The employee pays 6.2% of his covered wages, and the employer pays a matching 6.2%.⁷ The rates were lower in Joe’s early years and climbed to their current level by 1990; we use the actual historical rate for each year, not a flat average.
Here is the first thing the program’s defenders prefer not to dwell on. That employer share is not free money from the sky. It is part of the cost of employing Joe. It is money his labor generated, money that would have reached his pocket as wages if the government had not required his employer to send it to Washington instead. Economists across the spectrum agree on this point: the employer’s half of the payroll tax is borne by the worker in the form of lower wages. So when we count what Joe “paid,” the honest figure includes both halves. It is the full price of Joe’s participation in the program, whether the dollars passed through his paycheck or never appeared on it.
Across 49 years, the numbers are these:
Joe’s own contributions, the money withheld from his paychecks: $104,405.
His employers’ matching contributions, the money his labor forced them to send on his behalf: $104,405.
The combined total, the full cost of Joe’s participation: $208,810
In inflation-adjusted 2026 dollars — which is the only fair way to weigh a dollar paid in 1979 against a dollar paid in 2019 — that combined figure is $346,036. That is the real, lifetime cost of what the government required of Joe and his employers in his name.
What Joe Gets Back
Now the other side. Joe’s benefit is not a simple percentage of what he paid. It is the output of a formula deliberately complex enough that almost no ordinary person can compute it, and that complexity is not an accident we will return to at the end. Here is how it actually works.
First, every year of Joe’s earnings is “indexed” — adjusted upward to reflect the growth in national wages since that year was earned, using a factor tied to the year Joe turned 60.⁸ This converts his old, small-dollar paychecks into their modern equivalents. Second, the Social Security Administration takes his highest 35 indexed years, adds them together, and divides by 420, the number of months in 35 years. The result is his Average Indexed Monthly Earnings, or AIME. For Joe, that figure is $4,887 per month.
Third, that AIME is run through what the program calls the “bend point” formula. For a worker reaching eligibility in 2026, it works in three tiers:⁹
90% of the first $1,286 of AIME, which equals $1,157.40.
Plus 32% of the AIME between $1,286 and $7,749, which for Joe equals $1,152.38.
Plus 15% of any AIME above $7,749, which for Joe is $0, because he never earned that much.
Add those tiers and truncate to the dime, and you get Joe’s Primary Insurance Amount: $2,309.70 per month, or $27,716 in his first year. Because Joe claims exactly at his full retirement age, that is his actual benefit, with no reduction and no bonus. Each following year it grows by an assumed cost-of-living adjustment of 2.7%.¹⁰
We pay this benefit from 2026 until Joe’s actuarial death in 2042. We apply the federal tax that Joe owes on his benefits as a single filer with his modest other income.¹¹ And we arrive at Joe’s lifetime take.
Joe’s gross lifetime benefits: $550,308 nominal.
After the federal tax he owes on those benefits: $539,421 net.
In inflation-adjusted 2026 dollars: $437,811 net.
The Verdict of Part 1
Set the two sides next to each other in real, inflation-adjusted dollars. Joe and his employers paid in $346,036. Joe receives $437,811 back. He comes out ahead by about $91,775 dollars in today’s money — a real return of roughly 1.27 times what was paid.
So Social Security does, in the narrowest sense, return more than it costs the median worker. We state that plainly because it is true, and because the strongest version of the opposing case deserves to be on the table. A defender of the program would stop here and declare victory. Joe gets back more than he put in. What is the complaint?
The complaint is everything in Parts 2 and 3. A 1.27-times real return spread across nearly five decades from first payment to last receipt is, as an investment, dismal — well under 1% per year. The question is not whether Joe got his money back. He did, barely. The question is what that same money could have done if it had remained his. And to answer that, we have to imagine a Joe who kept it.
Part 2 — The Counterfactual Begins: Joe Keeps His Money and Pays His Debts
America has a personal-debt problem. Households carry revolving credit-card balances at interest rates that, in recent years, have climbed above 21%.¹² For the average family, that interest is a slow bleed — money paid to a bank for the privilege of having spent money one did not yet have. It is one of the most destructive forces in ordinary household finance.
So let us run the first counterfactual. Imagine the Social Security payroll tax had never existed. Imagine that in each year of Joe’s career, the full combined contribution — his share and his employer’s share, the same $208,810 over his lifetime — had instead remained available to him. And imagine Joe, being a sensible average man, used it first to do the single smartest thing an indebted household can do: pay off the credit card.
The question of Part 2 is simple. How much interest would Joe have avoided, and what would he have retained?
We measure this with discipline. We never let Joe save more interest than he actually incurred — he cannot avoid a cost that was not there.¹³ We use the actual average interest rate for each year, from Federal Reserve data.¹⁴ And we apply his retained contributions against his actual average debt balance, year by year.
What emerges is striking, and it reframes the whole exercise. Joe’s combined Social Security contribution is enormous compared to the credit-card debt a typical household actually carries. By the end of the very first year, 1977, Joe’s retained contribution already exceeds his entire household credit-card balance. From that point forward, the money the government was taking from him every year was, all by itself, larger than the debt it could have erased. Over his lifetime, the retained contributions grow to more than twenty times his outstanding balance.
The consequence is that Joe could have wiped out every dollar of credit-card interest he ever paid. The entire lifetime interest burden of an average household over these 49 years comes to about $38,351 in nominal terms, or roughly $62,657 in inflation-adjusted 2026 dollars.¹⁵ Joe’s retained Social Security money erases all of it, completely, and is left with the overwhelming majority of the funds untouched.
This is the quiet scandal hiding inside Part 2. We tend to imagine the payroll tax as a manageable bite, a reasonable contribution to a shared system. But measured against the actual debt of an actual average household, the money the government takes is not a manageable bite. It is a fortune. It is so large that merely redirecting it could have eliminated one of the heaviest burdens in working-class life — the credit-card interest treadmill — and barely made a dent in the principal.
But paying off debt is only the beginning, because a sensible man would not let the rest sit idle.
Part 3 — The Counterfactual Completed: Joe Invests the Rest
Average Joe would not have stuffed the leftover money under his mattress. The average American with money left over after paying his debts does the ordinary, prudent, unglamorous thing: he puts it in the market. And the most average, most boring, most widely recommended place to put it is an S&P 500 index fund — the 500 largest American companies, bought as a single basket and held.
So here is the completed counterfactual. Each year, Joe takes his retained Social Security contribution. He first clears his credit-card balance, as in Part 2. Then he invests every remaining dollar in an S&P 500 index fund and leaves it there. He reinvests the dividends. He does not trade, does not panic, does not touch it. He simply holds, through every boom and every crash, for 49 years.
We use the actual historical total return of the S&P 500 for every year from 1977 through 2025, dividends reinvested.¹⁶ Joe rides the 1987 crash, the dot-com collapse of 2000 through 2002, and the 37% single-year loss of 2008. He never sells.
By the end of 2025, Joe’s account holds $2,605,992. Adding back the small reserve he kept idle to cover his debt, his total retained-wealth position is $2,615,817 in nominal terms, or about $2,667,544 in inflation-adjusted 2026 dollars.¹⁷
Set that against what Social Security gives him. In real, inflation-adjusted, apples-to-apples 2026 dollars:
Social Security pays Joe a lifetime net benefit of $437,811.
The same money, debts paid and the rest invested in the index, leaves Joe with $2,667,544.
That is roughly six times what Social Security returns. Expressed as retirement income, a conventional and cautious 4% annual withdrawal from Joe’s portfolio would pay him about $104,600 a year — nearly four times the $27,716 Social Security actually provides. And it would do so without ever touching the principal.
The honest objections belong right here, stated at full strength. Joe’s portfolio assumes a discipline few people manage: investing every year and never selling, holding through crashes that sent millions of real investors fleeing for the exits at exactly the wrong moment. The portfolio figure is before any tax on its gains, while the Social Security figure is after tax. And Social Security is not merely an investment; it is insurance, against disability, against outliving one’s savings, against leaving a widow with nothing. Joe’s index fund would not have paid him a dime if he had been disabled at 40. These are real differences, and they are the genuine price of what the program offers.
But they do not close a six-to-one gap. They explain it. The gap is the cost of the insurance and the guarantee — and it is an enormous cost, far larger than almost any worker realizes, precisely because the math is hard enough that almost no worker ever does it.
What Joe Lost
For Average Joe — the median American, built entirely from average numbers — keeping his own money would have been dramatically better than surrendering it to a government tax. Not marginally better. Not better in some contested, assumption-dependent way. Better by a factor of roughly six, in inflation-adjusted dollars, on the program’s own best-case assumption that every promised benefit is paid in full.
And there is a final dimension the comparison has so far understated. When Joe dies in 2042, his Social Security benefit simply stops. It vanishes. There is nothing to pass on, nothing to leave behind, no inheritance for his children. His decades of contributions purchased a stream of payments that ends with his last breath. The investment account does the opposite. At Joe’s death it still holds its full value — more than two and a half million dollars — and passes to his heirs. The money that Social Security consumes, Joe’s own invested money would have preserved and handed down. Across generations, that difference compounds into something far larger than a single retirement. It is the difference between a family that builds wealth and a family that rents its retirement from the state, one check at a time, until the checks stop.
A Final Aside: The Stewardship of the Money
It would be one thing if the government, having required this money of Joe, had been a careful steward of it. It has not been.
As of the spring of 2026, the United States carries a gross national debt above $39 trillion, climbing by billions each day.¹⁸ Social Security itself faces a long-range shortfall — the gap between what it has promised and what it can fund — estimated in the 2026 Trustees Report at roughly $31 trillion in present-value terms over the next 75 years.¹⁹ Looked at more broadly, the federal government’s total unfunded obligations run to about $73 trillion, and essentially all of that gap is driven by just two programs: Social Security and Medicare.²⁰ The money Joe was required to surrender was not locked in a vault and invested on his behalf. It was spent, replaced with government bonds — the government’s promise to tax future Joes to pay current ones — and the gap between the promises and the means has grown into one of the largest financial liabilities in human history.
Which raises the question this entire exercise leads to. If the program returns so little compared to the alternative, leaves nothing to one’s heirs, and rests on a financial foundation this precarious, why is it so popular?
The answer, in my view, is twofold, and both halves are on display in this very article. The first is rhetoric. Social Security tells a story about itself — security, solidarity, a compact between generations — that is far more appealing than what it actually delivers. The story does the work that the returns cannot. The second is complexity. The math that reveals the true cost is, by design, genuinely hard. Indexed earnings, bend points, average indexed monthly earnings, actuarial life tables, inflation adjustment, the taxation of benefits, opportunity cost compounded across half a century — these are not concepts the average citizen can run in his head, or even on a kitchen-table calculator. The difficulty is not a bug. It is what keeps the rhetoric standing. A program whose true terms were instantly legible to every worker would be a great deal harder to defend.
What has changed is that the math is no longer out of reach. The analysis behind this article — 49 years of wage data, tax rates, indexing factors, interest rates, market returns, and inflation adjustments, all cross-checked against their original government sources — was assembled with the assistance of modern artificial-intelligence tools that can do in minutes what would once have taken a team of actuaries weeks. For the first time, an ordinary citizen can ask the question and get the real answer. Average Joe can finally see what the government took from him, and what he might have had instead.
The numbers were always there. Now they are legible. Let that be the beginning of the conversation, not the end of it.
Endnotes
Social Security Administration, 2026 Annual Report of the Board of Trustees and accompanying press release, June 9, 2026. The OASI Trust Fund reserves are projected to deplete in the fourth quarter of 2032, at which point continuing income would cover approximately 78 percent of scheduled benefits. This analysis assumes, contrary to that projection, that full benefits continue.
Subject parameters constructed by the author. Birth year 1959; full retirement age of 67 applies to those born in 1960 or later, and Joe reaches full retirement age in 2026 for the purposes of this analysis, using the 2026 benefit formula.
Social Security Administration, National Average Wage Indexing Series, ssa.gov/oact/COLA/AWI.html; and U.S. Bureau of Labor Statistics, Current Population Survey, median usual weekly earnings of full-time wage and salary workers by age and sex (Chart 13, 2023). The longitudinal earnings profile combines the SSA wage level each year with the BLS age-earnings shape.
Social Security Administration, Period Life Table, 2023, as used in the 2026 Trustees Report; remaining life expectancy at exact age 67 for males is 16.11 years.
Board of Governors of the Federal Reserve System, G.19 Consumer Credit, series REVOLSL (Revolving Consumer Credit Owned and Securitized), retrieved via Federal Reserve Economic Data (FRED); divided by U.S. Census Bureau total households, series TTLHH via FRED, to produce a per-household balance.
Congressional Research Service, Report R47341, citing Health and Retirement Study data; median household income from pensions and retirement savings among recipients aged 65 and older, approximately $19,644.
Social Security Administration, FICA and SECA Tax Rates, ssa.gov/oact/progdata/taxRates.html. The OASDI rate for employees and employers is 6.2 percent each (12.4 percent combined) for 1990 and later, with lower rates in earlier years; the actual historical rate for each year was applied.
Social Security Administration, indexing methodology; earnings are indexed to the national average wage index of the year the worker attains age 60 (2019 for a worker born in 1959).
Social Security Administration, Benefit Calculation Examples for Workers Retiring in 2026, ssa.gov/oact/progdata/retirebenefit2.html. The 2026 bend points are $1,286 and $7,749; replacement factors of 90, 32, and 15 percent are fixed in law.
Cost-of-living adjustment assumption of 2.7 percent annually for years after the first, consistent with the recent inflation environment and within the range of the Social Security Trustees intermediate assumptions.
Internal Revenue Code provisions governing federal taxation of Social Security benefits, applying the $25,000 and $34,000 provisional-income thresholds for a single filer (not indexed for inflation); 2026 single-filer brackets and standard deduction per Internal Revenue Service Revenue Procedure 2025-32.
Board of Governors of the Federal Reserve System, G.19, series TERMCBCCALLNS (Commercial Bank Interest Rate on Credit Card Plans, All Accounts), via FRED; recent annual averages exceed 21 percent.
Methodological cap applied by the author: avoided interest in any year is limited to the interest actually incurred on the debt balance that year.
Interest rates by year: TERMCBCCALLNS (credit-card rate, all accounts) for 1994 through 2025; and series TERMCBPER24NS (Finance Rate on Personal Loans at Commercial Banks, 24-Month Loan) for 1977 through 1993, used as the pre-1994 bridge, both via FRED.
Author’s calculation from the sources in notes 5, 13, and 14; inflation adjustment via note 21.
S&P 500 annual total returns, dividends reinvested, 1977 through 2025; Slickcharts S&P 500 Total Returns series, cross-verified against the downloadable history file. Returns are gross of fund fees.
Author’s calculation. Each year’s retained combined contribution clears the household debt balance first, with the remainder invested in the S&P 500 at year-end and held; freed debt capacity in years of falling balances returns to the invested pool.
U.S. Department of the Treasury, Debt to the Penny, gross national debt of approximately 39.16 trillion dollars as of late May 2026; weighted-average interest rate on interest-bearing Treasury debt of 3.34 percent as of April 30, 2026, per Treasury Fiscal Data.
Social Security Administration, 2026 Annual Report of the Board of Trustees; the 75-year OASDI actuarial deficit is approximately 31 trillion dollars in present-value terms, equal to 4.42 percent of taxable payroll.
U.S. Government Accountability Office and Department of the Treasury, Financial Report of the United States Government; total federal unfunded obligation of approximately $73.2 trillion over 75 years in present-value terms, of which Social Security and Medicare account for essentially the entire amount.
Inflation adjustment throughout uses the Consumer Price Index for All Urban Consumers (CPI-U), U.S. Bureau of Labor Statistics via FRED series CPIAUCNS, annual average, expressed in 2026 dollars.
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