-
@ Kurt
2024-11-04 22:13:07The cost of government nanny state:
Assume a person at age 22 gets a job earning $30,000 a year. They never get a raise. Retire at age 65. This gives them an investing time horizon of 43 years. However, instead of having 15.3% paid in FICA tax, they get 15.3% of their income put into the S&P 500. (let's ignore the potential and promise of bitcoin for this example).
- 15.3% of $30,000 = $4,590 per year
- Assume annual rate of return of 9.65% (slightly less than historical S&P return)
- After 43 years they'll have $2,450,000 in their account.
- Using the "4% rule" would provide a retirement income of $98,000 a year or a little over $8,000 per month income for the rest of their life.
According to a CNBC article in 2020 https://www.cnbc.com/2020/03/20/how-much-can-you-get-from-social-security-if-you-make-30000-a-year.html Someone making $30,000 year on average in their lifetime will receive $1,357 per month at their full retirement age. This gives a net shortfall of $6,643 we all lose in our current system.
Now of course FICA is social security AND Medicare, but Social Security is 12.4% and Medicare is the remaining 2.9% of the total 15.3% in payroll tax. This equates to something like $317 per month in Medicare benefit, vastly short of the $6,643 remainder on the "privatized social security" account funded with the exact same amount of capital.
Now, the true "kicker" is in the unfortunate scenario of an untimely death. Say you die the day you'd start social security. In our current system you heirs get $255 death benefit (not a typo), in our new scenario they get $2,450,000.
To say that social security is a bad deal may be the understatement of the century. It is beyond time to revamp the system. I prefer no compulsion, but even if compulsion remains it is vastly superior to put this money in your own account you own and not contribute to the ponzi scheme we have now.