So I guess I was bored with the Patriots domination of the Titans this evening and found myself looking at social security. I've heard it said that if you were able to invest the 12.4% on your own, you'd have much more money that the annuity payments provided from social security. So of course I had to see this for myself.
I started from 1982 and median income of $14,210 as published by tax return information for my particular state and county. Then I increased the income by inflation for an ending median income of $52,171 forty-five years later. Assuming the 12.4% was invested in the S&P 500 over those 45 years, you would end up with $881,548 after a total return of 7.34% over that time frame as published by the Schiller S&P calculator.
BTW, I did the same thing for medicare and ended with $206,168 if you got to invest the money yourself.
I then took that income history and input the numbers into ESPlanner to see how much social security you would get after working all those years. Turns out you would received $24,727, or 48.3% of your final annual income prior to collecting SS. Not too bad, and if you throw in a no-working spouse, household SS would be $37,091, or 72.3% of household income. Surprisingly high from what I was expecting for the median income case. I believe these percentages would be higher the lower you go on the income scale. And inversely proportional the higher your household income is.
There is no doubt that a 65 years old you could get very nice annuity with the $881,548; however, I realize that SS is much more than just a retirement supplement, but also provides disability and a significant death benefit along the way to retirement.
I would post the spreadsheet I made for this analysis, but my posting skills are limited.
I started from 1982 and median income of $14,210 as published by tax return information for my particular state and county. Then I increased the income by inflation for an ending median income of $52,171 forty-five years later. Assuming the 12.4% was invested in the S&P 500 over those 45 years, you would end up with $881,548 after a total return of 7.34% over that time frame as published by the Schiller S&P calculator.
BTW, I did the same thing for medicare and ended with $206,168 if you got to invest the money yourself.
I then took that income history and input the numbers into ESPlanner to see how much social security you would get after working all those years. Turns out you would received $24,727, or 48.3% of your final annual income prior to collecting SS. Not too bad, and if you throw in a no-working spouse, household SS would be $37,091, or 72.3% of household income. Surprisingly high from what I was expecting for the median income case. I believe these percentages would be higher the lower you go on the income scale. And inversely proportional the higher your household income is.
There is no doubt that a 65 years old you could get very nice annuity with the $881,548; however, I realize that SS is much more than just a retirement supplement, but also provides disability and a significant death benefit along the way to retirement.
I would post the spreadsheet I made for this analysis, but my posting skills are limited.