October 24, 1998
©1998 Larsen
A person making $4 an hour will pay $948.48 into the Old Age Survivors Insurance (OASI) fund in the first year. OASI is what pays the retirement benefit of current retirees. Assuming 1.5% inflation, 2% wage growth per year and a United States Treasury rate of 5.6%, this person would produce a retirement income of $10,134 per year in 1998 dollars. Compare this to Social Security's benefit of $7,289, and it is a dismal return. In fact the United States Treasury rate would have to fall to a low of 4.68% to get the same benefit as Social Security would pay. One of the sad aspects is, this future retiree will receive only 58% of the projected $7,289 under Social Security. The reason is, in 2038 social Security will have only enough tax receipts coming in to pay this dismal amount (~58%). The really sorry aspect is, this analysis assumes the person retires at age 65. But Congress has other plans. They want to raise the age of retirement to 70 and increase YOUR FICA tax another 2 percentage points!
Assume we allow congress to raise the age of retirement to 70, but leave the FICA rate currently where it is. Social Security will now pay $7,398 a year. However, your contributions invested in United States Treasury Notes would earn$12,854. Even under Social Security, the most you will get working to age 70 is 78% of your salary. However, YOUR MONEY actually earns an amount capable of earning a retirement benefit that is a minimum of 54% greater than your current wage.
How would you like to retire with 54% MORE MONEY THAN YOU CURRENTLY MAKE IN A YEAR?
Now let's assume we allow congress to also raise our OASI rate to 13.4%. Your social Security Benefit will not increase. However, YOUR MONEY would now earn you a retirement amount equal to $15,109. Would you like to retire with a minimum of 82% more than you make now?
| TREASURY RATE @ 5.60%, WAGE GROWTH @ 2.00%, YEARS IN
RETIREMENT 20 YEARS, INFLATION @ 1.50%, RETIREMENT AGE = 65,
OASI TAX @ 11.40%
1998 DOLLARS | ||||||||
| SOCIAL SECURITY TREASURY INVESTED OASI TAX | ||||||||
| SOCIAL SECURITY | YOUR OASI MONEY | |||||||
| HR RATE | BENEFIT | HR RATE | ROR | % OF WAGE | FUTURE BALANCE at 65 | BENEFIT* | HR RATE | % MORE |
| $4.00 | $7,289 | $3.50 | 4.68% | 76% | $264,247 | $10,134 | $4.87 | 39% |
| $8.00 | $10,498 | $5.05 | 3.73% | 55% | $528,494 | $20,268 | $9.74 | 93% |
| $12.00 | $13,707 | $6.59 | 3.33% | 48% | $792 ,741 | $30,403 | $14.62 | 122% |
| $16.00 | $16,915 | $8.13 | 3.10% | 44% | $1,056,989 | $40,537 | $19.49 | 140% |
| $20.00 | $18,810 | $9.04 | 2.75% | 39% | $1,321,236 | $50,671 | $24.36 | 169% |
| $25.00 | $20,690 | $9.95 | 2.37% | 35% | $1,651,545 | $63,339 | $30.45 | 206% |
| $30.00 | $22,570 | $10.85 | 2.08% | 31% | $1,981,854 | $76,006 | $36.54 | 237% |
If Social Security is terrible for the person making below minimum wage, then whom is Social Security supposed to BENEFIT?
The more you make over $4 an hour, the worse it gets.Most politicians have little or no economic or business training. Why are we trusting our retirement investments and planning to them? Would you fly on an airline which had no flight training for their pilots, but who knew how to book reservations? We have the same thing with social security. Politicians are not knowledgeable in investing or finance. Would you place your retirement saving with a company $5 trillion in debt, and who has run a loss for 26 out of the last 27 years? That is exactly what we are doing with social security.
Let's tell Congress we do not agree with raising the retirement age to 70. Lets tell congress NOto raising the FICA rates. Lets tell congress we want to eliminate this unfair transfer of Wealth to others. Tell congress "The buck stays with me!"Write your United States Representative and tell them you support elimination of Social Security!
* Assumes the retiree lives to 20 years past retirement
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