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The assumption is that making that much money for that length of time you would have invested in your own privatized retirement fund.
And you should have.
As mentioned, SS is meant as a supplement, not a mainstay.
Unfortunately a lot of older people were under the impression that Social Security was their retirement pension. Maybe years ago a person could live on SS if their house was paid for but not anymore. My mother also receives only $1200 a month and she worked from 24-55. When my stepfather died, his pension stopped and she was forced to either sell her house or take out a reverse mortgage.
As for where the money goes, from everything I have learned over the years, the working people today are paying for the Social Security for retired people because the government kept borrowing $$$ from Social Security which they were never supposed to do. But then that is typical.
I really think the person that started this thread had a Maalox moment and needed to vent to the world how successful they are. They are long gone now from the forum and off to another quest. All is well now.
Just think about it. What do they have to gain? An anonymous making $100k, who cares? And who cares if they claim to make a million.
Really your comment is very tiresome and you keep repeating it over and over again. Moderator cut: personal attack
However, I did invite some of my online friends to read the retirement forum but to be careful of the cross section of people from economic spectrum here. I hope she never let out that she and her husband makes $400k each per year.
I thought about this thread as I opened my W2 a minute ago. The general feeling is with no SS we could have done much better with our own investments. Well I just looked at my 2017 SS contribution. I used that figure, compounded the sum by factoring in this same yearly contribution for the past 45 years at 5% and came up with a sum of money that when drawn at 4% is considerably lower than my estimated SS benefit. Now 5% is probably too conservative but keep in mind for nearly all of the 35 years I have on record with SS I didn't earn nearly the amount of money I do now so obviously my SS contributions were much much lower.
So it doesn't look like such a bad deal after all to me..
A couple of flaws in your calculation. First, you have ignored the fact that your employer has also matched the amount you contributed. Also, your 4% draw ignores the principal balance. You'd instead have to determine what an annuity payment would be.
Out of curiosity I pulled my earning history from SSA and using the historical rate tables I calculated what I and my employer have contributed over the past 40 years of earnings. I then estimated the future payments into SSA for next 12 years until age 67 (it's easy, I'll have none as I'm now retired). Using spreadsheet to calculate the future value at age 67 I easily come out ahead having accumulated payments into my own account compared to projected SSA benefit (used 4% return rate and 1.5% COLA adjustments).
Just think about it. What do they have to gain? An anonymous making $100k, who cares? And who cares if they claim to make a million.
Really your comment is very tiresome and you keep repeating it over and over again.
However, I did invite some of my online friends to read the retirement forum but to be careful of the cross section of people from economic spectrum here. I hope she never let out that she and her husband makes $400k each per year.
Well the original poster signed up in 2014 and made exactly 2 posts and disappeared. I am thinking the person is a regular on this forum and has another screen name, posted and left.
Moderator cut: off topic I have learned a lot from the forum and I can spot the pat on the back types a mile away. As I said before, the internet is a great venue if you have burned the local audience and need that 'Stuart Smalley' self affirmation on a daily basis.
Like I tell people in person and it applies on online too that need to profess how successful they are. "I am so proud of you, please do not ever leave"
A couple of flaws in your calculation. First, you have ignored the fact that your employer has also matched the amount you contributed. Also, your 4% draw ignores the principal balance. You'd instead have to determine what an annuity payment would be.
Out of curiosity I pulled my earning history from SSA and using the historical rate tables I calculated what I and my employer have contributed over the past 40 years of earnings. I then estimated the future payments into SSA for next 12 years until age 67 (it's easy, I'll have none as I'm now retired). Using spreadsheet to calculate the future value at age 67 I easily come out ahead having accumulated payments into my own account compared to projected SSA benefit (used 4% return rate and 1.5% COLA adjustments).
I think the comparison using just your contribution, not the employer match is the right one. The question in a lot of people's mind is whether they would be better off not paying the FICA and instead investing it. In that case all you have going into an IRA (or whatever) is just what you are now paying in FICA.
If you do that, then you also have to consider the draw-down model. Drawing down from an investment account is decidedly not the same as an annuity payment, which is what SS is.
I went through the above calculation in post #150 in this thread. My conclusion was that SS is the better deal, and that was even with quite liberal historic values for gains in the stock market (which is where the best ROI will be gotten for a saving account).
I think the comparison using just your contribution, not the employer match is the right one. The question in a lot of people's mind is whether they would be better off not paying the FICA and instead investing it. In that case all you have going into an IRA (or whatever) is just what you are now paying in FICA.
I consider what the employer has paid as being inclusive considering it then similar to 401K with matching contribution. But that's what's interesting about talking finances, especially retirement, everyone has a different view and assumptions. As a result no one is really right or wrong, just a difference in perspective.
Because the return from SS is decidely means tested for both amount paid to you and amount that is taxed, the ROI, even including the employers 100% match is SIGNIFICANTLY better for lower income individuals that will pay zero income tax on the higher amount, based ona percentage of income used to calculate their SS, vs the higher income person who will pay income tax on 80% of their SS for life. Only the higher income people can even start to argue that Private investment of SS contributions may be a higher ROI if employer contributions are included. For lower income people it is a no brainer, unheard of ROI, with employers contributions included.
Because the return from SS is decidely means tested for both amount paid to you and amount that is taxed, the ROI, even including the employers 100% match is SIGNIFICANTLY better for lower income individuals that will pay zero income tax on the higher amount, based ona percentage of income used to calculate their SS, vs the higher income person who will pay income tax on 80% of their SS for life. Only the higher income people can even start to argue that Private investment of SS contributions may be a higher ROI if employer contributions are included. For lower income people it is a no brainer, unheard of ROI, with employers contributions included.
^^^^^^^^^^^^^^ The above is an important point, so often overlooked or perhaps just not known at all.
A couple of flaws in your calculation. First, you have ignored the fact that your employer has also matched the amount you contributed. Also, your 4% draw ignores the principal balance. You'd instead have to determine what an annuity payment would be.
Out of curiosity I pulled my earning history from SSA and using the historical rate tables I calculated what I and my employer have contributed over the past 40 years of earnings. I then estimated the future payments into SSA for next 12 years until age 67 (it's easy, I'll have none as I'm now retired). Using spreadsheet to calculate the future value at age 67 I easily come out ahead having accumulated payments into my own account compared to projected SSA benefit (used 4% return rate and 1.5% COLA adjustments).
While it is true employee contributions make a big difference to the solvency of SS we are talking about individual contributions and if we would be better off with or without SS.. With no SS you won't have an employee match so it's not fair to weightone side with that contribution and one side without it. The only way to do it IMO is to use your contribution figures only and then compare it with where you would have been had you contributed that exact amount into an IRA.
Your observation (which is true beyond question) is an argument for Social Security being insurance, as opposed to being an annuity. (It seems to me it has some characteristics of both).
My "insurance" analogy: I have paid premiums for homeowners' or renters' insurance for many, many decades and have never had a claim on any of those policies. Since I am now 72, the likelihood of my having one before I die is not very great.
So yes, people die without ever collecting a cent from SS, or die after collecting for only a short time, say a year or two. In those cases, their premiums went to minor children of deceased workers, spousal benefits, and to others who did live longer, just as my homeowners' insurance premiums have been going to people who had a claim. SS insures us against outliving all financial support. It works as intended.
This is exactly right. SS is insurance. Too many people count on it as an annuity and start collecting as fast as they can. And since it is an insurance, I will wait as long as I can to take it to insure that just in case I live too 100 (doubtful)- I am good to go! If I were able to wait to 70, I could pretty much live on SS alone. And it would be pretty substantial.
Sure, there is a risk you may never collect a penny. But who cares- you are dead??!! If you are worried about leaving something to your heirs, use other methods. SS is insurance for you living long- period.
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