That may be true, but the government still lies about what people will be able to take out, just like Madoff. Social security has a massive unfunded liability. This means that one of three things happen:

* Benefits amounts are reduced for everyone (In my view, this is probably the fairest option)

* Retirement age is increased for everyone (I personally hate this option, but think that it's the most likely)

* Benefits become even more means tested than they already are (and they are, even though people claim they're not -- high income people get far less per dollar in than low income people) (In my view, this is probably the least fair option)

If you're under 50ish and you're counting on Social Security, I think you're making a judgement error. Especially if you're in the upper income quintile. Everyone that's in the top 20-25% needs to be putting the maximum allowed amount into their 401(k) every. single. year. If you can't save around 18% of household income in a 401(k) or 403(b) due to the limits, save after tax (unless, of course, you plan on working until almost age 70).

Personally, because I put a lot into my 401(k) I'll be much better off in retirement than I am now if I actually get Social Security and the pension that I've been promised by my megacorp, but since I'm 36 and all of the boomers are working on retiring, I'm pretty sure that both will be bankrupt.

The fact that you managed to uncover these super-secret issues and the fact that they are widely discussed and debated explains in part how the government plans are different from an illegal ponzi scheme.

Are there other parts of the 'plan' that make it different?

To me the fact that the intent of it is entirely different (it's not an investment fund, it's a social welfare program and those two things are pretty dissimilar), it's transparent, and it's underwritten by taxes makes it a very very different beast overall.

Is the end result not the same? The later investors lose their investment while the early ones reaped the benefits.

The inflow and outflow of money is pretty predictable. I don't get why it's certain that "later investors" lose their money with social security. It's more of a tax than an investment so it can really only fail if the government mismanages it but that's true of any welfare program

Social security needs more income streams; if it kept with percentage of income, it wouldn't have a funding. the 100k cap on SS taxes is bunk and doesn't take into account shift in income patters (higher income individuals taking compensation in forms that aren't taxed as high as income)

Very good info thanks. You should not been downvoted.

As far as I remember through reading Madoff depositions, some of his clients knew he is running ponzi, so previous post's claim that its a secret don't always apply.

> some of his clients knew he is running ponzi,

That would be a conspiracy then.

Where is it defined that a ponzi scheme is necessarily secret? Google'd it and couldn't find any definition which says it must be "secret" to be a ponzi scheme.

Moreover, it doesn't matter if it's secret or not because your wages are forcibly garnished.

A scheme is not necessarily kept a secret.