Quote:
Originally Posted by tuccillo
There is a lot of stuff in the original that isn't correct. I actually took a look at this a while back. Here are some numbers to ponder:
I'll consider one of the fringe scenarios for kicks. Assume you retired today at age 70 after working for yourself for 35 years and you were at the SS max tax for the last 35 years. I'll ignore any less than max tax contributions when you were younger. This would amount to $386K in tax paid. If you computed the future value of that assuming 7.5%, you would have $1.3M. If you started making a "safe" withdrawal of 4% from this future value pool of money you could withdraw about $54K per year. Your social security benefit would be about $55K per year. If you dropped dead tomorrow, your heirs would inherit the $1.3M but with SS the benefit stops.
I don't think anyone doubts that you could do better by investing the money yourself. However, that is not the point. SS is a "pay as you go" safety net and we all participate as part of society. Congress does need to fix SS as the trust fund will be depleted in about 11 years and the benefit will be reduced about 25%, IIRC. Fortunately, the steps needed to fix SS are clear. Unfortunately, any attempts to do what needs to be done gets labeled as wanting to eliminate SS and our less than informed electorate doesn't understand the issues.
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If you do the same calculation using the lowest income level, you will find that the Social Security benefits would greatly exceed the investment potential for the individual. That is because the Social Security system is a wealth transfer system, and it was never designed to benefit all participants equally.