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Reply #96: that's not a fair comparison [View All]

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hfojvt Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Sep-21-10 10:53 AM
Response to Reply #17
96. that's not a fair comparison
If you work from when you are 20 until you are 60 that is 40 years of tax payments. Most people are not gonna collect benefits for 40 years. They will pay in for more months than they collect.

Here's what I figured. Back in 2006 I made $22,924. According to my benefit statement for that year if I kept working until age 62 I could collect $656 a month. At age 67 I could collect $993 a month (but I think retiring at age 62 is a better deal). So then I projected forward and back on how much I would have paid in (including what my employer paid) and figured a 5% return on my investment. Using those figures I got a nest egg of $175,170.51 by 2024. 5% of that is $8758 a year but my benefits only pay $7872 a year. Put another way, my investment only pays 4.5% and the government gets to keep the $175,000 that I paid in.

That does not seem like a good investment for me as a $20,000 a year worker, but perhaps the benefits would go way up too over $656 a month after 18 years of COLAs. The other part is that lately a 5% return is not that easy to get, not with a safe investment. I am gonna recalculate things though, using actual t-bill rates.

The other part is age 67 and the higher payments. Taking it to age 67, the nest egg becomes $239,972.92 and 5% of that is $11,963 a year and the benefits only pay $11,916. So less than a 5% return and I never get my $200,000 back.
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