Social Security
August 25th 2010 04:43
So I lost my first draft of this so here we go again.
I was reviewing my check stub a few days ago and realized that I am getting screwed by the Federal Government. They are stealing lots of money form me and giving me nothing in return. Although this could be attributed to many taxes, the focus on this article is the social security tax.
The Federal Government is currently taking 12.4% (My and Employer portion) to go toward social security. The big question is what will I get in return?
Lets look at some scenerio’s with the following information:
Average Income: $80,000
Status: Married
Years of working: 35
Retirement age:67
So Social Security says that if you work for 35 years and make an average of $80,000 over those 35 years, you will receive benefits of $2,220 a month. If your spouse stays at home (allows for most benefit form social security) they will receive half ($1,110) at retirement age. Think its sounds pretty good? But wait. Let’s compare that to some other numbers.
The amount that you have paid into Social Security is $347,200. This means that in order to break even you and your spouse have to get social security for over 8 ½ years. If you start drawing at different times this number changes.
How much does social security expect you to receive?
By looking at the chart above, you can see that they expect you to receive $179,514 more in benefits than you paid in. This means they expect you and your spouse to draw social security for almost 22 years.
Remember, these numbers change if someone dies, they decide to change the benefits, or they change the tax structure. Also if you both earn money it will more than likely be less. Also, social security uses the last 35 years of earnings. If you retire early and take a lower paying job, or have passive income on which you do not pay social security, it may decrease the amount.
If you were given the money and allowed to invest it in mutual funds here is what you would end up with.
At age 67, after investing 12.4% for 35 years with a return of 8% you would have $1,909,688.02. If you only pulled 5% of this money to live off of you would start out receiving $7957.00 a month. You would not even be touching the balance so each year this would go up. The 8% is a very conservative number. If it was 10% you would have $3,165,985.54 and by taking 5% each year you would have $13,200 a month, and it would go up like before because you would not even be touching the principal.
How can anyone look at these numbers and not consider social security a bad plan?
Even if I was half wrong you would still be getting $4,000 a month. Under social security the best case scenario is $3,330 a month!!!!
I was reviewing my check stub a few days ago and realized that I am getting screwed by the Federal Government. They are stealing lots of money form me and giving me nothing in return. Although this could be attributed to many taxes, the focus on this article is the social security tax.
The Federal Government is currently taking 12.4% (My and Employer portion) to go toward social security. The big question is what will I get in return?
Lets look at some scenerio’s with the following information:
Average Income: $80,000
Years of working: 35
Retirement age:67
So Social Security says that if you work for 35 years and make an average of $80,000 over those 35 years, you will receive benefits of $2,220 a month. If your spouse stays at home (allows for most benefit form social security) they will receive half ($1,110) at retirement age. Think its sounds pretty good? But wait. Let’s compare that to some other numbers.
The amount that you have paid into Social Security is $347,200. This means that in order to break even you and your spouse have to get social security for over 8 ½ years. If you start drawing at different times this number changes.
How much does social security expect you to receive?
(From Wikipedia.org)
By looking at the chart above, you can see that they expect you to receive $179,514 more in benefits than you paid in. This means they expect you and your spouse to draw social security for almost 22 years.
Remember, these numbers change if someone dies, they decide to change the benefits, or they change the tax structure. Also if you both earn money it will more than likely be less. Also, social security uses the last 35 years of earnings. If you retire early and take a lower paying job, or have passive income on which you do not pay social security, it may decrease the amount.
If you were given the money and allowed to invest it in mutual funds here is what you would end up with.
At age 67, after investing 12.4% for 35 years with a return of 8% you would have $1,909,688.02. If you only pulled 5% of this money to live off of you would start out receiving $7957.00 a month. You would not even be touching the balance so each year this would go up. The 8% is a very conservative number. If it was 10% you would have $3,165,985.54 and by taking 5% each year you would have $13,200 a month, and it would go up like before because you would not even be touching the principal.
How can anyone look at these numbers and not consider social security a bad plan?
Even if I was half wrong you would still be getting $4,000 a month. Under social security the best case scenario is $3,330 a month!!!!
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