Counting on Social Security?

[Updates below.]

See why you shouldn't

Age: 22
Male
ZIP Code: 78753
Current Earnings: $25,700
Investments: 45% in Blue Chips, 5% in Start-ups, 10% in Corporate Bonds, 40% in US Treasury Bonds
Default for everything else

The results:

Taxes Paid into Social Security
$542,028

Monthly Benefits
$2,883

Rate of Return on Monthly Benefits
-1.86%

Verses...

Total Value of your PRA at Retirement
$1,576,525

Rate of Return of your PRA at Retirement
4.99%

OR

Monthly PRA Benefits
$6,421

Rate of Return on PRA Monthly Benefits
1.60%

Amount Passed to Heirs (Bequest)
$1,282,763

That's 5% as opposed to a negative 1.8%. You make money instead of losing it. Monthly benefits over 4.5 times as large. A way to accumulate and pass down the wealth. Not to mention the FREEDOM to choose the best way to save your money for the future.

Another Social Security Calculator spits out these numbers using equivalent data as above:

Value of Benefits at the Time of Your Retirement:

Monthly SS Payment
$1,943

Rate of SS Return
1.1%

Monthly Payment if payroll taxes were invested in 60% Stocks 40% Bonds
$6,951

Rate of S&B Return
4.8%

For every $1 of Social Security benefits you would have received $3.58 if your taxes had been invested in bonds and stocks. For every $1 of taxes paid, you can expect to receive $0.36 in benefits. For government to meet all its commitments to you, the payroll tax will have to be 28.08% in the year of your retirement [current rates are around 10-15%].

Now, the actual Social Security website has it's own online calculators. Using the "quick" one, I get:

Retire at age 62 in 2024, monthly benefit of $1,089.00
Retire at age 67 in 2029, monthly benefit of $1,577.00
Retire at age 70 in 2032, monthly benefit of $1,968.00

Of course, these are all estimates based on assumptions and incomplete data. However, the overall trend it obvious. It makes much more sense to use your money in the open financial market than let the government hold on to it.

UPDATE(6/24/2004 9:01am)
Forgot to mention a newer entry on this: Social Security Fraud.

Posted by Drizzten at December 17, 2002 11:46 PM