This is a little crude, but I hope someone will do a more sophisticated one at some point (maybe someone has). OK here we go:
Someone born in 1980 and earning $15,000/year (about $7.00/hr. 40/hrs./week 52 weeks/year) for 35 years, will receive $763/mo. beginning at age 67 (full retirement) according to the Social Security Benefits calculator.
More below the fold.
From the Benefits calculator estimate:
Retirement Benefit Estimates (in 2005 dollars)
Retirement age Monthly benefit amount (1)
62 and 1 month in 2042 $537.00
67 in 2047 $763.00
70 in 2050 $946.00
(1) Assumes no future increases in prices or earnings.
Compare with the privatized SS idea:
Using a Compound Interest Calculator, assuming $600/yr (4% of $15,000) with a consistent 8% return (usually the average return I hear when someone is trying to sell me mutual funds or stocks) over 35 years, this person would have $111,004.16.
Wow, sounds like a lot? Divide it by $763 (the amount SS would pay per month--for life) and receive that $763/mo. for 145.48 months or slightly over 12 years. In other words, the money would run out at about age 79 if this person retired at age 67.
This calculation doesn't take into account:
- earning at a higher level over time (would increase $)
- normal fees required to manage an individual account (would decrease $ - perhaps substantially)
- incompetence of account owner (we're not all financial wiz kids - tend to decrease $)
- incompetence/fraud by financial advisor(s) (possibly wipe out $)
- more erratic work/earnings history because of economy or personal reasons (child-rearing, taking care of parents, etc.) (likely to decrease $)
- doesn't include the smallish amount of Social Security taxes that stay in a defined benefit plan (about 2.5% I believe) (would increase $)
- erratic stock market (could go either way, but could be very risky if it goes down right before retirement age--or during retirement)
- Oh yeah--also doesn't take into account all the benefits to your family if you should die young or become disabled.
So, what would we as a society do if substantial numbers of people (hundreds of thousands or even millions) ran out of money or had too little to live on? Guess we would have to recreate Victorian workhouses--or maybe just reconstitute Social Security
as it is now!
This is my first diary--please be gentle ;>