May 9, 1999
© Larsen
This file contains an analysis of the tax rates paid by the average worker from age 20 till either age 62 or 65. The OASI benefit has been calculated using Social Security's OASI benefit formula. Using the Gradient Formula for Annuities the present balance of a fund required to fund that cash flow adjusted for inflation was determined. Working backwards, an iterative program determined the tax rate necessary in conjunction with the prevailing US Treasury Rates to provide the beginning balance to fund the OASI cash stream.
Two methods were used in calculating the effective rate of return. Method one used the average Inflation rate since 1937 up to the year or retirement while Method two used the inflation rate in the year prior to retirement.
In summary the OASI tax rate applied to current retirees was less than half of today's rate of 10.3%. How many workers would like to have half their OASI contributions each week? The last column also shows what type of benefit cut wold be required to bring current retirees OASI benefit in line with what they paid.
| TABLE 1
RETIREMENT AGE = 62 | |||||||||||
| METHOD 1 | |||||||||||
| YEAR BORN | OASI BENEFIT | FUTURE VALUE NEEDED | US TREASURY RATE | INFLATION | IE | N | CALCULATED BALANCE | TAX RATE REQUIRED | TAX RATE PAID | RATIO OF TAX RATES | PROPOSED BENEFIT CUT |
| 1917 | $3,504 | $51,893 | 8.20% | 3.90% | 4.14% | 17.6 | $51,893 | 12.42% | 3.09% | 33.51% | 66.49% |
| 1918 | $3,782 | $53,163 | 9.11% | 4.12% | 4.80% | 17.6 | $53,163 | 11.57% | 3.19% | 25.64% | 74.36% |
| 1919 | $4,109 | $51,136 | 11.00% | 4.31% | 6.42% | 17.7 | $51,136 | 9.94% | 3.29% | 28.41% | 71.59% |
| 1920 | $4,483 | $48,087 | 13.33% | 4.41% | 8.55% | 17.7 | $48,088 | 8.18% | 3.40% | 34.15% | 65.85% |
| 1921 | $4,934 | $54,880 | 12.78% | 4.40% | 8.03% | 17.7 | $54,880 | 8.22% | 3.49% | 42.64% | 57.36% |
| 1922 | $5,203 | $65,208 | 11.03% | 4.38% | 6.37% | 17.8 | $65,209 | 8.74% | 3.59% | 43.62% | 56.38% |
| 1923 | $5,453 | $62,276 | 12.40% | 4.38% | 7.68% | 17.8 | $62,277 | 7.40% | 3.71% | 42.38% | 57.62% |
| 1924 | $5,779 | $73,822 | 10.78% | 4.36% | 6.15% | 17.9 | $73,822 | 7.91% | 3.82% | 51.59% | 48.41% |
| 1925 | $6,029 | $94,674 | 7.99% | 4.30% | 3.54% | 17.9 | $94,673 | 9.40% | 3.92% | 49.58% | 50.42% |
| 1926 | $6,202 | $94,516 | 8.40% | 4.30% | 3.93% | 18.0 | $94,516 | 8.66% | 4.02% | 42.79% | 57.21% |
| 1927 | $6,595 | $97,426 | 8.82% | 4.30% | 4.33% | 18.0 | $97,425 | 8.21% | 4.11% | 47.49% | 52.51% |
| 1928 | $6,931 | $103,941 | 8.66% | 4.31% | 4.17% | 18.1 | $103,941 | 8.10% | 4.20% | 51.15% | 48.85% |
| 1929 | $7,200 | $108,674 | 8.63% | 4.34% | 4.10% | 18.1 | $108,675 | 7.85% | 4.28% | 52.87% | 47.13% |
| 1930 | $7,536 | $119,907 | 7.96% | 4.32% | 3.49% | 18.1 | $119,907 | 8.08% | 4.36% | 55.55% | 44.45% |
| 1931 | $7,814 | $133,518 | 7.08% | 4.29% | 2.67% | 18.2 | $133,517 | 8.47% | 4.43% | 54.78% | 45.22% |
| 1932 | $8,218 | $153,045 | 6.06% | 4.27% | 1.72% | 18.2 | $153,044 | 9.23% | 4.49% | 53.05% | 46.95% |
|
METHOD 2 | |||||||||||
|
1917 |
$3,504 | $75,738 | 8.20% | 9.02% | -0.75% | 17.6 | $75,738 | 18.13% | 3.09% | 33.51% | 66.49% |
| 1918 | $3,782 | $106,141 | 9.11% | 13.29% | -3.69% | 17.6 | $106,141 | 23.09% | 3.19% | 17.57% | 82.43% |
| 1919 | $4,109 | $91,654 | 11.00% | 12.52% | -1.35% | 17.7 | $91,654 | 17.82% | 3.29% | 14.23% | 85.77% |
| 1920 | $4,483 | $64,113 | 13.33% | 8.92% | 4.05% | 17.7 | $64,113 | 10.91% | 3.40% | 19.05% | 80.95% |
| 1921 | $4,934 | $53,015 | 12.78% | 3.83% | 8.62% | 17.7 | $53,015 | 7.94% | 3.49% | 31.98% | 68.02% |
| 1922 | $5,203 | $62,753 | 11.03% | 3.79% | 6.98% | 17.8 | $62,753 | 8.41% | 3.59% | 45.15% | 54.85% |
| 1923 | $5,453 | $60,649 | 12.40% | 3.95% | 8.13% | 17.8 | $60,649 | 7.21% | 3.71% | 44.04% | 55.96% |
| 1924 | $5,779 | $71,142 | 10.78% | 3.80% | 6.73% | 17.9 | $71,142 | 7.62% | 3.82% | 52.97% | 47.03% |
| 1925 | $6,029 | $75,798 | 7.99% | 1.10% | 6.82% | 17.9 | $75,798 | 7.52% | 3.92% | 51.45% | 48.55% |
| 1926 | $6,202 | $95,424 | 8.40% | 4.43% | 3.79% | 18.0 | $95,424 | 8.74% | 4.02% | 53.44% | 46.56% |
| 1927 | $6,595 | $98,230 | 8.82% | 4.42% | 4.22% | 18.0 | $98,229 | 8.28% | 4.11% | 47.04% | 52.96% |
| 1928 | $6,931 | $106,482 | 8.66% | 4.65% | 3.83% | 18.1 | $106,481 | 8.30% | 4.20% | 50.73% | 49.27% |
| 1929 | $7,200 | $123,617 | 8.63% | 6.11% | 2.37% | 18.1 | $123,617 | 8.93% | 4.28% | 51.61% | 48.39% |
| 1930 | $7,536 | $109,527 | 7.96% | 3.06% | 4.75% | 18.1 | $109,526 | 7.38% | 4.36% | 48.83% | 51.17% |
| 1931 | $7,814 | $120,396 | 7.08% | 2.90% | 4.06% | 18.2 | $120,396 | 7.63% | 4.43% | 59.97% | 40.03% |
| 1932 | $8,218 | $136,203 | 6.06% | 2.75% | 3.23% | 18.2 | $136,203 | 8.22% | 4.49% | 58.83% | 41.17% |
| TABLE 2
RETIREMENT AGE = 65 | |||||||||||
| METHOD 1 | |||||||||||
| YEAR BORN | OASI BENEFIT | FUTURE VALUE NEEDED | US TREASURY RATE | INFLATION | IE | N | CALCULATED BALANCE | TAX RATE REQUIRED | TAX RATE PAID | RATIO OF TAX RATES | PROPOSED BENEFIT CUT |
| 1917 | $5,568 | $43,497 | 13.33% | 4.41% | 8.55% | 14.6 | $43,497 | 7.04% | 3.34% | 52.03% | 47.97% |
| 1918 | $5,544 | $44,730 | 12.78% | 4.40% | 8.03% | 14.6 | $44,730 | 6.38% | 3.44% | 48.83% | 51.17% |
| 1919 | $5,748 | $51,473 | 11.03% | 4.38% | 6.37% | 14.7 | $51,472 | 6.59% | 3.53% | 55.39% | 44.61% |
| 1920 | $6,276 | $51,885 | 12.40% | 4.38% | 7.68% | 14.7 | $51,884 | 5.88% | 3.65% | 55.48% | 44.52% |
| 1921 | $6,732 | $61,370 | 10.78% | 4.36% | 6.15% | 14.7 | $61,370 | 6.26% | 3.76% | 63.98% | 36.02% |
| 1922 | $7,128 | $77,624 | 7.99% | 4.30% | 3.54% | 14.8 | $77,625 | 7.32% | 3.87% | 61.72% | 38.28% |
| 1923 | $7,512 | $79,807 | 8.40% | 4.30% | 3.93% | 14.8 | $79,806 | 6.94% | 3.96% | 54.13% | 45.87% |
| 1924 | $8,244 | $85,341 | 8.82% | 4.30% | 4.33% | 14.9 | $85,341 | 6.82% | 4.05% | 58.44% | 41.56% |
| 1925 | $8,736 | $91,671 | 8.66% | 4.31% | 4.17% | 14.9 | $91,671 | 6.76% | 4.14% | 60.67% | 39.33% |
| 1926 | $8,868 | $93,638 | 8.63% | 4.34% | 4.10% | 15.0 | $93,638 | 6.37% | 4.22% | 62.44% | 37.56% |
| 1927 | $9,276 | $102,538 | 7.96% | 4.32% | 3.49% | 15.0 | $102,538 | 6.48% | 4.29% | 67.40% | 32.60% |
| 1928 | $9,444 | $111,008 | 7.08% | 4.29% | 2.67% | 15.1 | $111,008 | 6.59% | 4.36% | 67.36% | 32.64% |
| 1929 | $9,768 | $123,614 | 6.06% | 4.27% | 1.72% | 15.1 | $123,614 | 6.98% | 4.43% | 67.24% | 32.76% |
| 1930 | $10,188 | $120,191 | 7.05% | 4.24% | 2.70% | 15.1 | $120,191 | 6.39% | 4.49% | 64.41% | 35.59% |
| 1931 | $10,620 | $126,950 | 6.88% | 4.21% | 2.56% | 15.2 | $126,951 | 6.37% | 4.55% | 71.14% | 28.86% |
| 1932 | $11,064 | $135,156 | 6.59% | 4.20% | 2.30% | 15.2 | $135,155 | 6.42% | 4.60% | 72.19% | 27.81% |
| METHOD 2 | |||||||||||
|
1917 |
$5,568 | $55,422 | 13.33% | 8.92% | 4.05% | 14.6 | $55,421 | 8.97% | 3.34% | 52.03% | 47.97% |
| 1918 | $5,544 | $43,428 | 12.78% | 3.83% | 8.62% | 14.6 | $43,427 | 6.20% | 3.44% | 38.32% | 61.68% |
| 1919 | $5,748 | $49,830 | 11.03% | 3.79% | 6.98% | 14.7 | $49,829 | 6.38% | 3.53% | 57.05% | 42.95% |
| 1920 | $6,276 | $50,726 | 12.40% | 3.95% | 8.13% | 14.7 | $50,727 | 5.75% | 3.65% | 57.30% | 42.70% |
| 1921 | $6,732 | $59,481 | 10.78% | 3.80% | 6.73% | 14.7 | $59,480 | 6.07% | 3.76% | 65.44% | 34.56% |
| 1922 | $7,128 | $64,410 | 7.99% | 1.10% | 6.82% | 14.8 | $64,409 | 6.07% | 3.87% | 63.68% | 36.32% |
| 1923 | $7,512 | $80,445 | 8.40% | 4.43% | 3.79% | 14.8 | $80,445 | 6.99% | 3.96% | 65.24% | 34.76% |
| 1924 | $8,244 | $85,930 | 8.82% | 4.42% | 4.22% | 14.9 | $85,931 | 6.87% | 4.05% | 57.97% | 42.03% |
| 1925 | $8,736 | $93,538 | 8.66% | 4.65% | 3.83% | 14.9 | $93,539 | 6.89% | 4.14% | 60.25% | 39.75% |
| 1926 | $8,868 | $104,226 | 8.63% | 6.11% | 2.37% | 15.0 | $104,226 | 7.09% | 4.22% | 61.19% | 38.81% |
| 1927 | $9,276 | $95,060 | 7.96% | 3.06% | 4.75% | 15.0 | $95,059 | 6.01% | 4.29% | 60.55% | 39.45% |
| 1928 | $9,444 | $101,842 | 7.08% | 2.90% | 4.06% | 15.1 | $101,842 | 6.05% | 4.36% | 72.66% | 27.34% |
| 1929 | $9,768 | $112,224 | 6.06% | 2.75% | 3.23% | 15.1 | $112,224 | 6.33% | 4.43% | 73.29% | 26.71% |
| 1930 | $10,188 | $109,061 | 7.05% | 2.67% | 4.26% | 15.1 | $109,062 | 5.80% | 4.49% | 70.95% | 29.05% |
| 1931 | $10,620 | $114,353 | 6.88% | 2.54% | 4.23% | 15.2 | $114,354 | 5.74% | 4.55% | 78.40% | 21.60% |
| 1932 | $11,064 | $127,851 | 6.59% | 3.32% | 3.17% | 15.2 | $127,851 | 6.08% | 4.60% | 80.14% | 19.86% |
