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SOCIAL SECURITY IS A MUCH BETTER DEAL THAN ITS CARPING CRITICS SAY IT IS

How much are you "earning" on your Social Security account? Surprise, surprise -- you're doing better than you think!

Critics who want to junk the system say you're getting a return of only 2 percent and could do better in a lowly bank account. But they're giving you the wrong impression. You're hearing propaganda aimed at getting you to accept turning Social Security into a private investment system.

Here's the truth, from the Social Security Advisory Council's report: Your contribution earns as much as you'd get from any investment that's completely free of risk. You're doing as well or better as you would with Treasury securities.

Also -- a point that's completely ignored by Social Security's critics -- the "return" on your money includes the cost of providing you with life insurance and disability insurance, as well as retirement income. Many young people don't even know that their families have this extra government protection.

How does Social Security calculate your "return on investment?" The method is very different from the way you track your return from stocks or bonds.

Social Security estimates a total return for every age group and income range. It starts each group at age 22 and tracks the members through the expected end of their lives.

Along the way, a certain percentage of each group will become disabled and start drawing benefits.

Another percentage will die. Their young children will receive Social Security benefits through age 17. Surviving spouses often get benefits, too.

Social Security assumes that the remaining group starts drawing retirement income at 65. A percentage of accounts will include benefits for a spouse. Some will provide payments to young children or an ex-spouse.

All of these potential payments are figured into each age group's total return on investment.

Social Security also considers rising life spans, probable wage levels and possible future payroll tax increases to maintain the current set of benefits.

So lots of things go into the calculation. You can't compare an age group's estimated average Social Security "return" with the investment return you might get from stocks, bonds or certificates of deposit.

Imagine subtracting the cost of life and disability insurance from your outside investment returns. If you did so, you'd have a much lower net yield.

How good are your Social Security returns? Surprisingly good, when you consider everything that's covered.

Take the classic married couple, with two children born when the parents were in their 20s. Assume, for each, the average lifetime income now earned by women and men.

Social Security calculates their "real" return -- that is, the amount they get after subtracting inflation. For this group, real returns range from 2 percent to 3 percent, depending on the age group.

By comparison, look at 10-year Treasury notes. New investors are currently earning around 5.2 percent. Inflation is running at 3.3 percent. After inflation, the real return on Treasuries is just 1.9 percent.

Social Security not only pays these couples a little more, it also effectively throws in life and disability insurance "free."

3. What about groups other than the mythical average married couple? Today's teenagers will earn closer to 2 percent real return if they start families when they're young. Today's middle-aged couples with teenage children are earning closer to 3 percent.

One-earner couples get higher returns. That's because only one person contributes while two or more people are eligible for benefits. Their average returns range from 3 percent to 4 percent after inflation -- up to twice what Treasuries currently pay.

People who never marry get lower returns that couples do. People with lower incomes get more than higher-income people do.

Again, that's on average. Individually, we never know in advance which of Social Security's benefits we're going to use. That's what makes it an insurance, not an investment, program. You've bought a safety net to protect against death, disability or insufficient retirement income.

What is Social Security earning on its current surplus? Today's surplus (or "trust fund") is being credited with 5.6 percent interest -- more than Treasury notes pay. Funny that opponents are kicking Social Security around. If it really was a pure investment, buyers would be flocking in.

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