Social Security shouldn’t be the bulk of an effective retirement plan, advisors say.

Critics charge Social Security, as the primary retirement savings tool and biggest tax for many Americans, is a bad deal because payments are puny.

It provides an average annual payment of some $17,000. The average recipient receives $1,461 a month, although most seniors pay a tax on these payments. They were untaxed until the 1980s.

Many advisors say they are wary about building a substantial part of a retirement plan around Social Security.

“I tell people to be very conservative about Social Security payments in building a retirement plan,” says Ronald Roge, a Bohemia, N.Y., advisor. “It should be no more than a third of your income.”

Charles Hughes, a Bay Shore, N.Y., advisor, warns that “if a client is expecting to get most of his income from Social Security, then there is very little I can do to help.”

Critics complain it provides a lousy return, and taxpayers would do better with private investments.

“Americans would be better off keeping their payroll tax contributions and putting them into private retirement accounts than having to sacrifice them to the government’s broken Social Security system,” according to the Heritage Foundation’s study “Is Social Security Worth Its Cost?”

Social Security officials say the program provides value because it includes disability as well as retirement income coverage.

Still, the Heritage Foundation study says younger workers are the biggest losers under the current Social Security system. The returns on Social Security taxes will be between negative 0.04% and negative 14.53%, it says.

Social Security, collected through payroll taxes, is the biggest tax many low-income workers pay at 12.4%. (An employer and employee each pay half. An independent contractor pays it all).

“We are telling young people to put money into this program that guarantees zero or negative returns,” says Rachel Greszler, an author of the report.

Greszler notes this is versus a 4.76% annual return for those conservatively invested: half in stocks and half in government bonds, according to the study.

Social Security officials defended the program as comprehensive.

“Rates of return on Social Security are complicated because these benefits include disability and survivors protection as well as CPI-indexed life annuities for retirees, something not offered in the commercial market,” says Stephen Goss, Social Security chief actuary.

“The value of such insurance protection,” he adds, “goes beyond just the average benefit payments, as indicated by the premiums charged for commercial insurance.”

Goss argues that accumulation in private accounts “can vary widely based on timing and investment choices. As a result, serious proposals for providing some portion of Social Security protection in the form of individual accounts have generally provided some form of guaranteed return to eliminate the prospect that some individuals will have poor experience.”

But beyond the debate over private accounts, everyone agrees on this: The current Social Security system is in the red and Congress must act over the next 15 years. Benefits must either be reduced or taxes raised again or the system’s two trust funds will reduce payments by about a quarter.

The Social Security Trustees project “the combined trust funds will be depleted in 2035.”

Goss, in a sentiment shared by Social Security critics, says “Congress must act.”

Congress must find new Social Security funding, a persistent problem.

Both presidents Carter and Reagan, in the 1970s and 1980s, respectively, signed Social Security reform packages that called for higher taxes and benefit cuts.

Carter said his package would make the system “sound.” Reagan said changes would “protect the financial integrity of Social Security.”

Neither happened.

The issue for this pay-as-you-go system is how much should the government tax one generation to pay for the benefits of another?

Hillary Clinton, in defending the program, said, “When Franklin Roosevelt proposed Social Security, he didn’t go out selling it with actuarial tables.”

Correct.

Indeed, Henry Morgenthau, FDR’s Treasury Secretary in 1935, warned Social Security founders weren’t considering future taxpayers. Would they always be willing to pay higher and higher taxes?

Morgenthau had doubts.

“They would place all confidence in the taxing power of the future to meet the needs as they arise,” Morgenthau wrote. “We do not share this view.”

The conventional solution, already under discussion, usually is higher taxes and cuts, Greszler warns. She predicts “no matter who wins in 2020, the next administration will not support private accounts.”

But there is another fundamental issue, going back to the program’s origins.

In the 1935 Congressional report on the first Social Security law, the program’s framers wrote, “We can’t ask support for a plan not at least as good as any American could buy from a private insurance company.”