CALCULATION OF OASI BENEFIT INVESTED PRIVATELY VERSUS OASI
©1998 Larsen
It has been stated a person starting work today will continue to get back what they paid into OASI in three to five years and this is paying the maximum. Let us take a look at a person making 50% of the average wage all their working lives. 50% is equivalent today (1999) to $6.71 per hour.
Using the assumptions below, one would at 5.5% interest rate accumulate $411,891 by the time they reach 65. $411,891 would produce, if one lived to 100, an annuity, adjusted for inflation, equal to $20,803. This compares to Old Age Survivor Insurance paying $20,805.
If one earned the 6% by investing in United States Savings bonds (indexed for inflation) one would accumulate $472,962 by the time they reached age 65. This would produce a yearly payout adjusted for inflation each year to age 100 of $25,572.
Is it true you will get back your contributions in three to five years? This person will have paid $117,151 in OASI taxes and will take 5.5 years to return just the principal. However, when the time value of money is analyzed, OASI will never match your contributions plus 6% if you live as long as 62 years.
Now what happens if the person ends up at age 64 earning 50% more than the average wage? The accumulated balance at age 65 is $746,391 which produces an annuity of $40,356 a year. However, OASI's benefit now increases to $30,314 per year, but is still 33% less than privately invested. It will take till age 109 to recoup your contributions plus time value of money.
However, the thing to keep in mind in all of this is what is the probability of living to age 100? For a person born in 1994 the probability of living to age 100 is 0.472% for a male and 2.236%
Do you think OASI is a fair to workers today?
| WAGE GROWTH 2.5% | AVG WAGE AT RETIREMENT | $74,929 | |||
| ROR 5.5% | AVERAGE INDEXED WAGE | $3,033 | |||
| INFLATION 2.0% | BEND 1 | $1,316 | |||
| OASI RATE 10.3% | BEND 2 | $7,914 | |||
| RETIREMENT AGE 65 | OASI BENEFIT (MONTHLY) | $1,734 | |||
| BALANCE AT RETIREMENT | $411,891 | OASI BENEFIT (YEARLY) | $20,805 | ||
| IE 1.76% | PRIVATELY INVESTED ANNUITY (35 YEARS OF RETIREMENT) | $20,803 | |||
| STARTING WAGE (% OF AVG) | 50% | ||||
| TABLE OF CASH FLOW FOR THIS ANALYSIS | ||||||
| AGE | YEAR | AVERAGE WAGE | % OF AVG | OASI PAID | INCOME | BALANCE |
| 20 | 1999 | $27,907 | 50.0% | $1,437 | $36.79 | $1,474.00 |
| 21 | 2000 | $28,605 | 50.0% | $1,473 | $120.86 | $3,068.02 |
| 22 | 2001 | $29,320 | 50.0% | $1,510 | $211.71 | $4,789.71 |
| 23 | 2002 | $30,053 | 50.0% | $1,548 | $309.80 | $6,647.23 |
| 24 | 2003 | $30,804 | 50.0% | $1,586 | $415.57 | $8,649.21 |
| 25 | 2004 | $31,574 | 50.0% | $1,626 | $529.50 | $10,804.77 |
| 26 | 2005 | $32,363 | 50.0% | $1,667 | $652.13 | $13,123.60 |
| 27 | 2006 | $33,172 | 50.0% | $1,708 | $784.00 | $15,615.96 |
| 28 | 2007 | $34,001 | 50.0% | $1,751 | $925.68 | $18,292.69 |
| 29 | 2008 | $34,851 | 50.0% | $1,795 | $1,077.79 | $21,165.31 |
| 30 | 2009 | $35,722 | 50.0% | $1,840 | $1,240.98 | $24,245.97 |
| 31 | 2010 | $36,615 | 50.0% | $1,886 | $1,415.93 | $27,547.58 |
| 32 | 2011 | $37,530 | 50.0% | $1,933 | $1,603.37 | $31,083.75 |
| 33 | 2012 | $38,468 | 50.0% | $1,981 | $1,804.08 | $34,868.93 |
| 34 | 2013 | $39,430 | 50.0% | $2,031 | $2,018.86 | $38,918.44 |
| 35 | 2014 | $40,416 | 50.0% | $2,081 | $2,248.59 | $43,248.44 |
| 36 | 2015 | $41,426 | 50.0% | $2,133 | $2,494.16 | $47,876.05 |
| 37 | 2016 | $42,462 | 50.0% | $2,187 | $2,756.57 | $52,819.40 |
| 38 | 2017 | $43,524 | 50.0% | $2,241 | $3,036.81 | $58,097.70 |
| 39 | 2018 | $44,612 | 50.0% | $2,298 | $3,335.98 | $63,731.20 |
| 40 | 2019 | $45,727 | 50.0% | $2,355 | $3,655.22 | $69,741.36 |
| 41 | 2020 | $46,870 | 50.0% | $2,414 | $3,995.75 | $76,150.92 |
| 42 | 2021 | $48,042 | 50.0% | $2,474 | $4,358.84 | $82,983.92 |
| 43 | 2022 | $49,243 | 50.0% | $2,536 | $4,745.87 | $90,265.79 |
| 44 | 2023 | $50,474 | 50.0% | $2,599 | $5,158.24 | $98,023.44 |
| 45 | 2024 | $51,736 | 50.0% | $2,664 | $5,597.49 | $106,285.34 |
| 46 | 2025 | $53,029 | 50.0% | $2,731 | $6,065.24 | $115,081.57 |
| 47 | 2026 | $54,355 | 50.0% | $2,799 | $6,563.15 | $124,444.00 |
| 48 | 2027 | $55,714 | 50.0% | $2,869 | $7,093.07 | $134,406.34 |
| 49 | 2028 | $57,107 | 50.0% | $2,941 | $7,656.85 | $145,004.20 |
| 50 | 2029 | $58,535 | 50.0% | $3,015 | $8,256.54 | $156,275.29 |
| 51 | 2030 | $59,998 | 50.0% | $3,090 | $8,894.24 | $168,259.44 |
| 52 | 2031 | $61,498 | 50.0% | $3,167 | $9,572.22 | $180,998.81 |
| 53 | 2032 | $63,035 | 50.0% | $3,246 | $10,292.86 | $194,537.97 |
| 54 | 2033 | $64,611 | 50.0% | $3,327 | $11,058.64 | $208,924.08 |
| 55 | 2034 | $66,226 | 50.0% | $3,411 | $11,872.26 | $224,206.98 |
| 56 | 2035 | $67,882 | 50.0% | $3,496 | $12,736.53 | $240,439.42 |
| 57 | 2036 | $69,579 | 50.0% | $3,583 | $13,654.39 | $257,677.14 |
| 58 | 2037 | $71,318 | 50.0% | $3,673 | $14,629.04 | $275,979.05 |
| 59 | 2038 | $73,101 | 50.0% | $3,765 | $15,663.76 | $295,407.51 |
| 60 | 2039 | $74,929 | 50.0% | $3,859 | $16,762.09 | $316,028.43 |
| 61 | 2040 | $76,802 | 50.0% | $3,955 | $17,927.74 | $337,911.47 |
| 62 | 2041 | $78,722 | 50.0% | $4,054 | $19,164.64 | $361,130.30 |
| 63 | 2042 | $80,690 | 50.0% | $4,156 | $20,476.96 | $385,762.79 |
| 64 | 2043 | $82,707 | 50.0% | $4,259 | $21,869.08 | $411,891.29 |
| 65 | 2044 | $84,775 | 50.0% | $23,233.91 | $435,125.19 | |
| 66 | 2045 | $86,894 | 50.0% | $24,544.48 | $459,669.67 | |
| 67 | 2046 | $89,066 | 50.0% | $25,928.98 | $485,598.66 | |
| 68 | 2047 | $91,293 | 50.0% | $27,391.58 | $512,990.24 | |
| 69 | 2048 | $93,575 | 50.0% | $28,936.68 | $541,926.92 | |
| 70 | 2049 | $95,914 | 50.0% | $30,568.94 | $572,495.86 | |
| 71 | 2050 | $98,312 | 50.0% | $32,293.27 | $604,789.12 | |
| 72 | 2051 | $100,770 | 50.0% | $34,114.86 | $638,903.98 | |
| 73 | 2052 | $103,289 | 50.0% | $36,039.21 | $674,943.19 | |
| 74 | 2053 | $105,871 | 50.0% | $38,072.10 | $713,015.29 | |
| 75 | 2054 | $108,518 | 50.0% | $40,219.67 | $753,234.96 | |
| 76 | 2055 | $111,231 | 50.0% | $42,488.37 | $795,723.33 | |
| 77 | 2056 | $114,012 | 50.0% | $44,885.05 | $840,608.38 | |
| 78 | 2057 | $116,862 | 50.0% | $47,416.92 | $888,025.30 | |
| 79 | 2058 | $119,784 | 50.0% | $50,091.61 | $938,116.91 | |
| 80 | 2059 | $122,779 | 50.0% | $52,917.17 | $991,034.08 | |
| 81 | 2060 | $125,848 | 50.0% | $55,902.11 | $1,046,936.19 | |
| 82 | 2061 | $128,994 | 50.0% | $59,055.43 | $1,105,991.62 | |
| 83 | 2062 | $132,219 | 50.0% | $62,386.62 | $1,168,378.24 | |
| 84 | 2063 | $135,524 | 50.0% | $65,905.72 | $1,234,283.96 | |
| 85 | 2064 | $138,912 | 50.0% | $69,623.32 | $1,303,907.28 | |
| 86 | 2065 | $142,385 | 50.0% | $73,550.62 | $1,377,457.90 | |
| 87 | 2066 | $145,945 | 50.0% | $77,699.45 | $1,455,157.35 | |
| 88 | 2067 | $149,594 | 50.0% | $82,082.31 | $1,537,239.66 | |
| 89 | 2068 | $153,334 | 50.0% | $86,712.40 | $1,623,952.06 | |
| 90 | 2069 | $157,167 | 50.0% | $91,603.66 | $1,715,555.72 | |
| 91 | 2070 | $161,096 | 50.0% | $96,770.83 | $1,812,326.55 | |
| 92 | 2071 | $165,123 | 50.0% | $102,229.46 | $1,914,556.01 | |
| 93 | 2072 | $169,251 | 50.0% | $107,996.01 | $2,022,552.02 | |
| 94 | 2073 | $173,482 | 50.0% | $114,087.83 | $2,136,639.85 | |
| 95 | 2074 | $177,819 | 50.0% | $120,523.28 | $2,257,163.13 | |
| 96 | 2075 | $182,264 | 50.0% | $127,321.74 | $2,384,484.88 | |
| 97 | 2076 | $186,821 | 50.0% | $134,503.69 | $2,518,988.57 | |
| 98 | 2077 | $191,492 | 50.0% | $142,090.76 | $2,661,079.32 | |
| 99 | 2078 | $196,279 | 50.0% | $150,105.79 | $2,811,185.11 | |
| 100 | 2079 | $201,186 | 50.0% | $158,572.94 | $2,969,758.05 | |
