Social Security Opt-out?
By Arnold Kling
Social Security should be a voluntary program. Every individual should have the right to opt out, without any restrictions on eligibility and without any requirement to justify their decision.
…Would individuals who opt out be reimbursed for past Social Security contributions?
The simplest answer would be “no,” individuals who opt out would permanently forfeit all past OASI contributions. Many people (myself included) experience the desire to opt out of Social Security with great intensity and would accept the loss of all past contributions in exchange for the opportunity to opt out of the system.
Some form of reimbursement would be more fair.
Immediate reimbursement would raise the near term Budget deficit, so my guess is that the most politically palatable form of reimbursement would be in the form of retirement benefits. That is, if you opt out at age 35, then when you reach age 65 you might be reimbursed for your paid-in Social Security taxes using a formula that incorporates compound interest. Most people are under the illusion that Social Security works that way now–that the benefits they receive represent principal and interest on their paid-in taxes. If only.