PDA

View Full Version : Would requiring the SSA to publish aggregate ROI figures help to end Social Security?




Mahkato
12-05-2008, 03:31 PM
If the Social Security Administration were required to publish aggregate data about taxpayers' return on their "investment" in Social Security help people to see it for the scam it is? Maybe they already publish something like this, but I couldn't find it. SSA Pubs (http://ssa.gov/pubs/index.html)

The reports would look at every deceased taxpayer and record their total taxes paid into SS during their careers and their total payments during retirement or disability. It would show things like the following:


The average taxes in and the average payments out
Comparisons of the above data, by gender and ethnic background (i.e. white women live significantly longer than black men, for example)
The average difference between each person's net payout and the amount they would have received had they deposited their SS taxes in an interest-bearing savings account instead
The amount of inheritance the deceased would have passed down to their children had they withdrawn from their own savings account at a level equal to their actual SS payment.

SS is clearly discriminatory towards people who have lower life expectancies (poor, minorities) but this never seems to get brought up by legislators. I think that this sort of publication might help in this regard.

Danke
12-05-2008, 03:38 PM
http://www.ncpa.org/ba/ba296.html

"...three Texas counties changed to a private system in 1981 and 1982."

"Nearly 20 years of experience in three Texas counties prove that a private disability plan works. If Congress reforms Social Security, it should consider remodeling DI to resemble the private plan - which provides better benefits for the disabled, is easier to qualify for and costs the federal government nothing. "

TastyWheat
12-05-2008, 10:23 PM
If you think the government can produce accurate numbers (CPI, GDP) then sure, that'd help.

Zippyjuan
12-05-2008, 11:26 PM
Return on investment? It is pretty much a "pay as you go" system. Money you pay in now goes either to people getting benefits now or is "borrowed" for use to spend on other things. I believe they do hold some Treasuries (the way they do the IOUs). There has never been any Social Security Trust Fund. Your contributions are not put away somewhere for you. They do mail you your "total contributions" and tell you what you will probably get at current rates- depending on what age you retire at. You can then use some life expectancy for yourself to try to decide how much money you may get before you die. They ususlly mail those out once a year.

Looking at one of mine from a few years back (just dug it our quickly) it says I have paid in $31,500 and if I work until age 67 could expect to receive $1500 a month. They presently take about $5000 a year (assuming my income does not change). I have about 20 years until then so that would mean $131,500 in contributions. I would break even at about 7 and a half years or around age 74. Yes, the longer you live, the better you make out as far as your return on what you put in goes.

I am noticing one thing they write on the estimated benefits page.

Your estimated benefits are based on current law. Congress has made changes to the law in the past and may do so at any time. The law governing benefits amount may change because, by 2041, the payroll taxes collected will only be enough to pay about 75% of scheduled benefits.

Danke
12-05-2008, 11:48 PM
Return on investment? It is pretty much a "pay as you go" system. Money you pay in now goes either to people getting benefits now or is "borrowed" for use to spend on other things. I believe they do hold some Treasuries (the way they do the IOUs). There has never been any Social Security Trust Fund. Your contributions are not put away somewhere for you. They do mail you your "total contributions" and tell you what you will probably get at current rates- depending on what age you retire at. You can then use some life expectancy for yourself to try to decide how much money you may get before you die. They ususlly mail those out once a year.

Looking at one of mine from a few years back (just dug it our quickly) it says I have paid in $31,500 and if I work until age 67 could expect to receive $1500 a month. They presently take about $5000 a year (assuming my income does not change). I have about 20 years until then so that would mean $131,500 in contributions. I would break even at about 7 and a half years or around age 74. Yes, the longer you live, the better you make out as far as your return on what you put in goes.

I am noticing one thing they write on the estimated benefits page.

Your examples are so wrong as usual.

Are you saying you earn ~$66,000 a year?

If so, your contributions are over $10,000. Not $5,000.

So your total contributions are more than double.


Now if you would only figure realistic gains relative to inflation, you should receive much greater in returns. Not to mention you actually contributed twice the amount as you stated.

Mahkato
12-06-2008, 12:03 AM
Return on investment? It is pretty much a "pay as you go" system. Money you pay in now goes either to people getting benefits now or is "borrowed" for use to spend on other things. I believe they do hold some Treasuries (the way they do the IOUs). There has never been any Social Security Trust Fund. Your contributions are not put away somewhere for you.

I know all that. I just want them to demonstrate how well SS has actually served individuals on a dollars-in/dollars-out basis.

The key fact that SS benefits do not get passed down to your offspring, unlike an IRA or other privately-owned account, is something that is missed by many.

Zippyjuan
12-06-2008, 12:12 AM
Your examples are so wrong as usual.

Are you saying you earn ~$66,000 a year?

If so, your contributions are over $10,000. Not $5,000.

So your total contributions are more than double.


Now if you would only figure realistic gains relative to inflation, you should receive much greater in returns. Not to mention you actually contributed twice the amount as you stated.


I don't make $66,000 a year. I have no idea where you get that number from. My annual income is quite a bit lower than that. The roughly $5000 was my SS withholdings for last year according to my W2. Since you do not know my income, I must conclude that my numbers are correct and yours are wrong. Unless my mistake is using official government numbers. But thank you for playing.

Danke
12-06-2008, 12:15 AM
I don't make $66,000 a year. The roughly $5000 was my SS withholdings for last year according to my W2. Since you do not know my income, I must conclude that my numbers are correct and yours are wrong. But thank you for playing.

Before taxes, how much do you make?

Danke
12-06-2008, 12:21 AM
My annual income is quite a bit lower than that.

So you make around $33,000?

Danke
12-06-2008, 12:31 AM
//

Zippyjuan
12-06-2008, 12:15 PM
My actual income is not relevant. I prefer not to post it online. But the other numbers are true and are provided to give some idea of my "pay back" period on Social Security. Numbers may be different for different individuals depending on how much you make over how many years.

Danke
12-06-2008, 12:53 PM
My actual income is not relevant. I prefer not to post it online. But the other numbers are true and are provided to give some idea of my "pay back" period on Social Security. Numbers may be different for different individuals depending on how much you make over how many years.

Your numbers don't add up, that is why I'm asking. Give me a hypothetical if you are so shy.

Zippyjuan
12-06-2008, 12:57 PM
What does not add up? How are they wrong? I just copied them from government forms. What should they be?

OK- I double checked. I did make a mistake. The number I posted for my SS withholding was actually my Fed withholding. My Social Security number was actually about $2500. Twenty more years at that rate would make an additional $50,000 or a total of about $81,000 in contributions over my lifetime. Collecting $1500 a month at age 67 would mean about four and a half years to get back (not allowing for any inflation or investment of those funds) all I paid in for my entire working career. People at higher income levels probably have a longer pay-back period (just a guess- no numbers).

Danke
12-06-2008, 01:20 PM
What does not add up? How are they wrong? I just copied them from government forms. What should they be?

Social Security tax 12.4% and the total Medicare tax 2.9% of wages.

You claim ~$5,000 from W-2 which half of the amount paid for your account.

For most people, if they invested 12.4% of their "wages" during their lifetime, they would come out much better than the current return from the government.

nickcoons
12-06-2008, 01:40 PM
For most people, if they invested 12.4% of their "wages" during their lifetime, they would come out much better than the current return from the government.

They certainly would:

http://www.nickcoonsforcongress.com/blog/view.php?id=4

Danke
12-06-2008, 01:50 PM
Salary X .062 = W-2 SS withholding

So in your case, $2,500/.062 = Salary, ~$40,322

I see you revised your numbers. That is why I was asking before, you make it sound like your an accountant, but your numbers were not adding up.

So the government is getting ~$5000 from your labor per year. Most are in the work force ~45 years before collecting SS.

Now many might not start out at $40,000, that is a reasonable amount to use as an average.

So $5000 x 45 years = $225,000 (no compounding interest, etc) Now if someone took that same $5000 every year in a simple interest bearing vehicle (CDs?), we know they would have a lot more than $225,000.

It gets much more extreme the more one makes.

The government just doesn't give back nearly the amount one pays into SS.

Danke
12-06-2008, 01:52 PM
They certainly would:

http://www.nickcoonsforcongress.com/blog/view.php?id=4

Nice:


"Social Security Scam - 02/28/2008


Social Security is one of the largest scams ever perpetrated on us by our government, as the following figures will clearly demonstrate.

If one makes $40,000/year, with 12.4% of that* being paid into Social Security, this person could retire at age 65 and collect benefits of $12,180/year.

If one makes $40,000/year, does not pay Social Security taxes, and instead puts that 12.4% into a mutual fund investment beginning at age 30 until retirement at age 65, this person will have saved up over $2.5 million. The interest alone on these savings would provide an income of over $300,000/year, and this person would have more than enough money to spread around in his will.

$300,000 is seven and a half times greater than $40,000. And this works with any income level. Whether the income is six figures or based on minimum wage, controlling your own investment instead of paying into Social Security will yield an annual income 7.5 times greater than the amount you made during your working life. If this isn't a scam, then I don't know what is.

* - The amount paid by an employee in Social Security taxes is 6.2%, but that amount is matched by the employer who considers this part of the expense of an employee. If these taxes were not mandatory, this amount would be paid to the employee, which makes it an indirect expense of an employee. The self-employed pay the entire 12.4% themselves. "

Zippyjuan
12-06-2008, 02:43 PM
Perhaps somebody can look at some real numbers for my case. How big of a nest egg would I need to be able to get the same $1500 a month Social Security says I will have qualified for? Obviously you need to make some assumptions about expected rate of return on investments. Am I better off with the $31,000 already contributed plus my future contributions (let's assume we start with that amount and add the full amount of $5,000 a year for the next 20 years)? What would be the needed rate of return on those amounts to equal $1500 a month or $18,000 a year?

Social security does not promise the highest rate of return- but guaranteed (as much as it can be guaranteed) return at retirement. Ask people today how their private investments are doing in the free market.

I ran some numbers on an online calculator here http://www.finance.cch.com/sohoApplets/CompoundSavings.asp using these numbers and they project a nest egg of about $200,000 in 20 years, assuming a 3% rate of return. I went conservative. Ten percent would be too optimistic in my view. Five percent gets it up to $250,000. This would also make the huge assumption that a person put away the full 12.4% of their income every year for that time. Now I need the other side- what return on that nest egg to get $1500 a month or $18,000 a year. On the low number side (the $200k nest egg), I would require a 9% rate of return starting in 20 years to give a fixed return of $18,000 a year every year after that. 7.2% on the higher number (assuming no drawdown of the principal). All of this also assumes no taxes. Adding in taxes on the investments will lower the actual returns. It also assumes that I get the entire additional 6.2% my employer presently pays and does not instead put that towards their own expenses or profits.

So looking at my own numbers, it does not seem as though I really do that bad via Social Security.

nickcoons
12-06-2008, 04:21 PM
So looking at my own numbers, it does not seem as though I really do that bad via Social Security.

A decent mutual fund has a rate of return of about 12% over any given 10-year period. If you want to figure conservatively, use 9%.

If you do $5,000/year for the next 20 years, you'd end up with~ $275,000. You could then expect an average annual income of ~$24,750.

In your case, it seems that Social Security has an unfair advantage in that you've been paying in to it for the past however many years, and if you went the private retirement savings route you'd be starting from scratch. While this is a real factor that you need to consider when planning for your retirement, this isn't an apples-to-apples comparison of Social Security versus private retirement savings.

Zippyjuan
12-06-2008, 09:46 PM
Thank you for checking some numbers for me. I think it will be difficult to get very close to 12% for a couple of years but it should eventually pick up again. However from roughly 1965 to 1985 stocks barely moved at all. That is also a possiblity to recur. You can never be certain what will happen in the future. I am fortunate that my employer presently has a defined benefit pension plan- fortunate as long as it is still there when I hope to retire. I keep my expenses very low and try to save in addition to that and I plan to have my home paid for long before then.

nickcoons
12-07-2008, 10:15 AM
Thank you for checking some numbers for me. I think it will be difficult to get very close to 12% for a couple of years but it should eventually pick up again. However from roughly 1965 to 1985 stocks barely moved at all. That is also a possiblity to recur. You can never be certain what will happen in the future.

The stock market's average annual gain in the past 70 years has been 9%. But you're right; there is no certainty.

Social Security is somewhat certain in that the government has a good track record of delivering Social Security checks. But as far as its stability, it is no more certain than private investing. Whereas a private investment will simply yield less in hard times, Social Security will yield the same dollar figure but it'll be worth less. So you get the same overall effect.

If Social Security were optional (i.e. you could opt-out of paying for and receiving benefits), then I wouldn't have any quarrel with it.

Danke
12-07-2008, 11:18 AM
If Social Security were optional (i.e. you could opt-out of paying for and receiving benefits), then I wouldn't have any quarrel with it.

It is.

http://www.losthorizons.com/tax/taximages/1ssn.jpg

http://www.losthorizons.com/tax/taximages/BorelliSSAResponse.jpg

Unless you are a government worker (includes military).

nickcoons
12-07-2008, 12:03 PM
It is.

Unless you are a government worker (includes military).

Interesting. I would gladly give up any amounts and benefits I've paid into Social Security thus far if it meant I wouldn't have to pay any more into it.

The documentation you posted seemed to indicate that it's not required for an individual to have an SSN. That would seem to imply that without an SSN, you are no longer required (in the eyes of either the SSA or the IRS) to pay into the Social Security system, but is that true?

On a practical level, how would this work? Would you mail your Social Security card to the SSA with a letter stating that you no longer have need for your SSN, and then inform your employer to discontinue withholding Social Security taxes? I assume that you could then file with the IRS for a TIN to satisfy banks and lenders who need a number like this.

What negative impacts are there, other than not being able to receive Social Security benefits, of opting out of the system? Does it preclude someone from running for office, for instance? If the system is already voluntary, then why does Ron Paul advocate making it voluntary? Have you opted out?

This is something I'm very interested in.. but skeptical.