Tuesday, September 13, 2011

Social Security Facts !

Social Security ~ Just The Facts !

Please see the enclosed documents, they were a lot of work to put together. Some facts.

I used a career starting in 1965 and ending in 2005 40 years.
In 1965 you only paid on the first $4800.00 so your income, above that is not relevant.

A person did not pay on $30,000.00 until 1982.

I used the thought that the fictional Person always paid in the Maximum , which in 2005 was $90,000.00 income.

I used the employer and employee contribution rate , However I think it would be more accurate to use only the employee contribution as there is no reason to believe that the employer would pay in unless forced to,,, by whom the Government ?

As you can see if one paid the Maximum for the 40 years at 5% interest it comes to $402,398.09.

I would assume that would entitle you to the maximum benefit which is now $2366.00 per month.
see http://ssacusthelp.ssa.gov/app/answers/detail/a_id/5/related/1/session/L2F2LzEvdGltZS8xMzE1ODY4OTgzL3NpZC93aVVlaVhEaw%3D%3D or $28392.00 per year. Remember this is always paying the max. in. After retirement this amounts to a 7% return on this investment. The money at that rate would be gone in about 15 years. or at age 80 in this scenario.

If you only count the Employee side you have about 1/2 of that amount.

The second chart is someone that made $30,000.00 every year . That will amount to $263,377.69 in 40 years . I will assume that this person would be entitled to the average retirement benefit of about $1,200.00 or $ 14,400.00 per year. This is about 5.46% return on the $263,377.69 and the funds will last about 18 years. Again if you take only the employees share it comes to $131,688.00
The only thing to argue about is the interest rate and I have no idea how 5% is anywhere near accurate over the period of time in question.

I also believe that a voluntary system could not work, as Americans have one of the lowest saving rates of any country.

Editorial : Thanks to my friend Steve Sauter in Hersey Michigan for this ! I believe that Social Security was and is one of our greatest tax-payer investments. We pay for it, politicians borrow it and never pay it back ! Don`t scrap it. FIX IT ! Or look for work, somewhere else.


Anonymous said...

I don't believe a 5% return is accurate whatsoever, as the rate is really only about 2%. When SS was first implemented, there were 16 or so workers for every retiree. Now that number is 3.3 workers/retiree. Also, the average lifespan was around age 64, and now it is around 78. Now, the equation is completely different and needs to be revisited. I would support hikes in SS payments to guarantee that I would have them if I reach the age of 80. However, we lose accountability for the individual when people are receiving benefits when they did not pay... Why not keep all accounts as individual accounts? For what it is worth, teachers in Tennessee MUST contribute towards their retirement, and there is no option to "opt out." You are absolutely right about the "saving" bit... Yes, keep SS separate from all other accounts, only pay retirees from it, and don't raid it!!

Anonymous said...

100% agree. The 5% rate of return is fair - considering the stock market volatility - if privately managed extremely well with extreme care - after paying broker fees etc. MAYBE an individual could get a higher rate - MAYBE - but not likely. And the value would fluctuate so much it wouldn't be there when you actually needed it. I don't know anyone who can put off their needed surgery or prescriptions until the market recovers. Do You? Nice work! Keep it up.