Social Security Surplus

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Quote Pierpont:

But like a Ponzi Scheme there may NOT be any increased demand in the future and those stock prices might easily fall... with "investors" left with pieces of paper. SS, on the other hand has been guaranteed... though I'm sure the GOP wants to sabotage that.

Thats exactly what is for me my money is take to give to my grandfather and im left with an IOU to be filled by my grand children.

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CollegeConservative
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May. 4, 2012 2:22 pm

Quote mauiman58:So if you want to discount my 1.3 million dollar account down to 1.1 million that is OK with me, the conclusion still stands. I would still rather have 1.1 million than $25,000 a year.
You're so convinced that you'd have that much. But have you answered my question about what would have happened if you, your wife, or kids were disabled at a young age? You just assume you're going to be healthy enough for your entire working life. But it just as easily might not happen. Now what? disability for you the wife and all the kids?

The bottom line is your objection is based on high income even though 90% of workers never pay the max into SS.

On the high income objection, it would be interesting to run the same analysis on the yearly median income rather than SS max. Let's assume the median income is half the SS max. Then my 1.1 million dollar figure would drop to $550,000. But what does the SS payout drop to . Does it get cut in half also to $13,000 or so? If it does, obviously my conclusion still stands.
Again, you're looking strictly as a retirement plan.... and we're now getting down in the income range where people easily might NOT be able to afford disability insurance for the entire family. Look, I tire of your whining. Yes, SS may be unfair to some people and benefit others. Like any insurance plan there's some redistribution and its funding/payout formula should be adjusted to keep the program solvent. But your conclusion that it's a "total rip-off" is nonsense. What you consider a Ponzi Scheme is SS's intergenerational funding mechanism. Unlike you I don't have your faith that TBill will always be high… as evidenced by that yield only being your 7% average in one of the past 20 years… or that stock returns will always grow.

Amusingly, Greenspan was just on CSPAN claiming that markets out of balance always return… and the stock market, which he claims has the LEAST government involvement, rebounded best. Greenspan is blind to the obvious that cheap Fed money and tax policy DOES prop up this market.

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Quote CollegeConservative:
Quote Pierpont:But like a Ponzi Scheme there may NOT be any increased demand in the future and those stock prices might easily fall... with "investors" left with pieces of paper. SS, on the other hand has been guaranteed... though I'm sure the GOP wants to sabotage that.

Thats exactly what is for me my money is take to give to my grandfather and im left with an IOU to be filled by my grand children.

You asked the question about stock market and now are evading the answer.

If you worry SS won't be there for you, you need to stop the GOP's war on SS instead of buying into their scare tactics or their pie in the sky fables about how well everyone can do in the private sector. Where would you be now if Lehman Brothers sold private retirement plans?

BTW, there's a difference between an SS IOU backed by the government.... and the stock market which is backed by nothing. I don't want to be a taxpayer having to bail out millions of destitute seniors who were sold on the market only to see the market deflate, crash, or undergo another 25 years of stagnation. After all… that 25 years could be someone's ENTIRE retirement. I'd rather see money invested in productive activities that build the economy instead of a crap shoot.

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Feb. 29, 2012 2:19 pm

I want a war on SS cause its an unsustainable model that i want nothing to do with i want freedom of choice i want the freedom to fail . I want more of my money more of my money to use as I see fit not as some sudo intellectual bureaucrat says it should be. When you allow freedom u get the most progress, there are failures but thats life. It is not my problem that the poetry major cant find a job and that they had to work a lower paying job and didnt plan accordingly for retirement. If you cant affored how u want to live lower your standard of living or get a better job, stop asking for government interference and wealth redistribution.

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May. 4, 2012 2:22 pm

So you know more about economics than Allan Greenspan! Sorry I did not know that, so I guess you must be in line to be the next Federal Reserve Chairman.

You are still ignoring DISABILITY INSURANCE. If I did not have so much money stolen out of my paycheck I could easily buy a policy that gave me the coverage that SS provides for about 10-15% of what I have to give to SS now. Then bank the rest. It's my money, I should be able to do with it what I want to and not have some beaurecrat tell me that he knows what to do with my money better than I do!

And your statement that T bills have only been above 7% once in the last 20 years is misleading. The yield on those bonds has always higher than 6.5% until 1997. And the AVERAGE for the last 30 years is 8.66%. And in my analysis what the stock market does is irrelavant. Like I said for my analysis I used actual yearly rates as reported on a US Governmant website.

The real problem is that we are talking about Social Security. That program is in great shape compared to Medicare and Medicaid.

The fact of the matter is that most of the money that gets paid out by SS is in the form of a government pension, like it or not. Why should I be forced to participate in a pension program that is not in my best interest? So some bleeding heart liberal politician can redistribute the income to buy himself (or herself) votes.

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Quote CollegeConservative:I want more of my money more of my money to use as I see fit not as some sudo intellectual bureaucrat says it should be.
I think it's about time you stopped pretending you're a 22 year old college student and admit you're probably 13.

When you allow freedom u get the most progress, there are failures but thats life.

You're back to your mythical world that doesn't exist. So you're saying we should get rid of the government perks and the safety net for business?. Government provides plenty of special benefits for business such as for protection of intellectual property and for limited liability corporation etc.

The notion that freedom and prosperity aren't enhanced though well run government is simply ignorance of how our system works.

It is not my problem that the poetry major cant find a job and that they had to work a lower paying job and didnt plan accordingly for retirement.
So you support a living wage where somene can have the job of their choice and earn enough to live on and plan for retirement? Didn't think so.

If you cant affored how u want to live lower your standard of living or get a better job, stop asking for government interference and wealth redistribution.

You mean like when the copyright was running out on Mickey Mouse and Congress passed special extensions? Are these not gifts from government to business? And you're still pretending it's NOT part of government's job to redistribute wealth? I raised the question earlier how poor, sparsely populated areas of the nation could pull themselves up by their own bootstraps when the private sector refused to invest? America works BECAUSE we make investments in states or parts of the nation that could not afford infrastructure improvements, medical care, or decent educations on their own. THAT IS WEALTH REDISTRIBUTION. It's the tide that lifts all boats… not tax cuts for the rich. From reading your posts, we obviously haven't spent enough on education.

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Feb. 29, 2012 2:19 pm

Pierpont. I believe it was Mark Twain who said "Don't ever argue with stupid people, they will drag you down to their level and then beat you with experience. :)

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Jun. 25, 2011 7:53 am

Sorry Pierpont, there is no guarantee that the line of work you would like to do in life will pay you enough money to live on. I'd like to get paid to play golf, but unfortunately I'm not good enough to make a living at that. So I had to find something else to do.

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mauiman58
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Jan. 6, 2012 6:45 pm

Thank you Pierpoint. I think someone is due a refund.

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Phaedrus76
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Sep. 14, 2010 8:21 pm

Thank you for that quote! I never heard it before.

http://english.stackexchange.com/questions/66460/origin-of-do-not-argue-...

chilidog
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Jul. 31, 2007 4:01 pm
Quote mauiman58:

On the disability insurance, again I say that is only a small portion of the money that get's paid out. I'll bet you could could get a policy similair to what SS offers at 10-15% of what you put into SS. So if you want to discount my 1.3 million dollar account down to 1.1 million that is OK with me, the conclusion still stands. I would still rather have 1.1 million than $25,000 a year.

Why guess? You already have your spreadsheet set up, just plug in the real numbers:

http://www.ssa.gov/oact/ProgData/oasdiRates.html

And then tell us what your contributions from 1982 to 2011 are worth today.

chilidog
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Jul. 31, 2007 4:01 pm

If you were given your ss contribution of 800 dollars in 1990 and invested it in say gold you could have bought 2 ounces that would be worth 4000 dollars where it would be worth less now in paper.

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CollegeConservative
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May. 4, 2012 2:22 pm

Why are progressives typically against means testing for SS and Medicare?

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Apr. 28, 2012 12:22 pm
Quote CollegeConservative:

If you were given your ss contribution of 800 dollars in 1990 and invested it in say gold you could have bought 2 ounces that would be worth 4000 dollars where it would be worth less now in paper.

No.

chilidog
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Jul. 31, 2007 4:01 pm

Hey Chilidog, good stuff, I did not know such data existed. Here are the numbers when I run the case only for the pension plan part of SS, I take out the disability part of the payment.

The total contribution drops to $223,000 and the amount that such a recipiant should get drops to just over 1.1 million. So taking out enough money to cover the disability portion of SS drops the amount a recipiant should get in 2010 from just under 1.3 million to just over 1.1 million.

The obvious arguement I make here is that if you want the government to force us to get disability insurance fine, that is only about 10-15% of SS. You realize that if you were 25 years old and given the option to opt out of SS (just buy the disability part of it) and just put the pension amount of that tax into an account that just bought t bills and you got to collect your own account after 35-45 years, you would be crazy to elect SS. Obviously they cannot do that because the whole system would then collapse, there would be no one paying into the system to support the current retirees. This is why we on the right brand this a Ponzi scheme. The only reason it does not colapse like Berni Maddoff's scheme is that Bernie could not force any more new investors into his program. The US Government can. And they have to. And they have to keep increasing the contributions of the new investors and reducing their benefits.

Sounded like a great idea when FDR started it, but he is long gone and look what a mess he left us. No matter to him, he got re elected, which is all he was looking for. (Yes I do realize the politicians on the right just want to get re elected also, they just do it in different ways).

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Quote mauiman58:

The total contribution drops to $223,000 and the amount that such a recipiant should get drops to just over 1.1 million. So taking out enough money to cover the disability portion of SS drops the amount a recipiant should get in 2010 from just under 1.3 million to just over 1.1 million.

This is the result when you ran the numbers for YOUR account from 1982 to 2011?

chilidog
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Jul. 31, 2007 4:01 pm

Sorry Maui but FDR didn't have anything to do with the mess we have today. Remember those Bush tax cuts that everybody wants to bury in the past? Well how do you figure those tax cuts were paid for?

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Quote Bush_Wacker:

Sorry Maui but FDR didn't have anything to do with the mess we have today. Remember those Bush tax cuts that everybody wants to bury in the past? Well how do you figure those tax cuts were paid for?

Paid for? Hell, we're still paying.

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Jul. 31, 2007 4:01 pm

Chilidog, this is for 1971 to 2010. If you do SS, you have to do at least 35 years to get any kind of decent SS payout. I can run it for 1981 to 2020 (40 years) if you want. I'll have to assume about a 3% increase in the max SS wages since they do go up every year. And I'll assume that the t bill rate does not change from the 2010 rate going forward (4.25%). And the SS tax rate stays constant going forward. For the contributions, I only used the pension part of the payment, I took out the part that covers the insurance.

For the years 1981-1990, I took the 30 year t bill rate in the year in question, then assumed 30 years of growth at the t bill rate at the year the taxes were taken. Then I assumed a 4.25% rate for the rest of the years until the end of 2020. For years 1991 and after, I took the t bill rate and assumed growth at that rate until the end of 2020.

Using those assumptions, I get the following

Total contributions: $343,000

What the account would be worth at the end of 2021: $1.8 million

Anticipated SS payout: $40-45,000 a year

Again, this represents someone putting in the max amount from 1981 to 2020.

An even worse deal than the 1971 to 2010 case. That's because during the period 1971-1980 SS tax rates and max SS wages were low.

Again, run the numbers for yourself, this is just all math.

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Jan. 6, 2012 6:45 pm

Bush_Wacker, we are just isolating SS here, the Bush tax cuts have no effect on SS.

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Jan. 6, 2012 6:45 pm

As of today you have a series of annuities due at varying dates: your 1982 SS due in 2012, your 1983 SS due in 2013, etc.

I want to know what those numbers show as of today.

Then we'll figure out how you're going to get to 1.1 million in 15 years.

chilidog
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Jul. 31, 2007 4:01 pm

Mauiman wrote: Why should I be forced to participate in a pension program that is not in my best interest?

poly replies: When old folks die in the streets, the rotting corpses tend to produce cholera outbreaks, etc., and the smell isn't pleasant.

. If living to a ripe old age yourself, is a preference for you, then pensions for the elderly are probably in your best interest.

If dying of cholera or living in stench is something you look forward to, I can understand your point of view.

Retired Monk - "Ideology is a disease".

polycarp2
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Jul. 31, 2007 4:01 pm

Quote Bush_Wacker:

Pierpont. I believe it was Mark Twain who said "Don't ever argue with stupid people, they will drag you down to their level and then beat you with experience. :)

Maui's not been that bad once he got off his fantasy $8000 a year number... and his rabid right wing rants. Don't have time to check his numbers but I've already admitted he may be right that SS isn't "fair" to all. All such programs are based on some redistribution of benefits. Is homeowners insurance "fair" to those who pay in for 50 years and never make a claim? Does that make it a "total rip-off"? And SS had to build up a surplus to cover the baby boomers and by definition that means all that we've been paying in has NOT been paid out. But his main objection is it's not fair to the top 10% of income earners who pay the maximum… that investing privately could pay more. Fortunately for his example his average TBill yields include years where the yield was abnormally high… and is not likely to be repeated. If one uses the stock market, the rise after about 25 years of stagnation is largely due to government policy to encourage pouring money into the stock market Ponzi Scheme. And his scenario hinges on being healthy all through one's working life. I have two friends who have MS and never got that chance. He counters with... just buy disability insurance. But such insurance is out of the reach of most people especially with the Right trying to drive down wages for the working and middle classes. Maui is just out of touch with regular folk. He seems to think everyone makes what he does... can afford disability insurance like he can, therefore SS to him is "total rip-off", and therefore it must also be for everyone. Anyway, it's a circular argument and I tire of it.

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Feb. 29, 2012 2:19 pm

Chilidog, not sure what else you are asking for. Like I said, you need at least a 35 year career here otherwise the SS payout is really pathetic, and I picked a 40 year career. The two cases I ran were for a 40 year career starting Jan 1, 1971 and Jan 1, 1981. Do you want another case? The case starting on Jan 1, 1971 is basically a 40 year career ending right now. Starting a 40 year career in 1972, 1973, 1974 etc will not change the answer much.

Also, remember there is a minimum age to collect SS, or they discount your payout. So using a 35 year career does not make much sense becuase that person would only be 55 or so, too young to get much out of Social Security.

But if you really want me to run another case I will.

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Jan. 6, 2012 6:45 pm

Pierpont, I guess you do not understand that my recent calculations take out the amount of money SS collects for insurance. It is about 10-15% of the total collected and it is a published number every year. For sake of arguement I'll concede that the government should collect that money for the insurance part of SS. It's the pension part of this deal (85% of the taxes collected) that is the Ponzi scheme. Like I said, anyone alive today would have much been better off paying the governmant for the insurance part of social security, then being allowed to invest the rest of the monies collected in t bills. It is not even close, and that is not just for the top 10%.

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Jan. 6, 2012 6:45 pm

Polycarp at some point people have to take responsibility for themselves and not be dependant on the government for every little thing. Everyone alive now would have been better off if they had been forced to invest in t bills rather than being forced to participate in Social Security.

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Quote chilidog:

Why guess? You already have your spreadsheet set up, just plug in the real numbers:

http://www.ssa.gov/oact/ProgData/oasdiRates.html

And then tell us what your contributions from 1982 to 2011 are worth today.

I thought those were the numbers Maui was running... at least judging from the two years he posted. But you're missing the point. Maui's claims depends on getting that average TBill rate up... and to do that he has to include years where they were abnormally high. Including the early 80's just suits his purposes. What if someone started saving in 1990?

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Feb. 29, 2012 2:19 pm

Pierpont, for that I will have to start at 1990 for 40 years forward from there. That includes almost 20 years that have not happened. What will the SS tax rate be, what will the max SS wages be going forward, what will the t bill rates be, and what will SS pay in 2030? Quite frankly you can manipulate those assumptions to give you whatever conclusions you want to, so just about any calculation made will be garbage in, garbage out.

But one thing we all know is that SS will have to collect more money and reduce benefits in the future. My money says I will not live long enough to see the day when SS is anything other a terrible deal for anyone putting their money into the program.

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Quote mauiman58:

Polycarp at some point people have to take responsibility for themselves and not be dependant on the government for every little thing. Everyone alive now would have been better off if they had been forced to invest in t bills rather than being forced to participate in Social Security.

Not true. Most people who worked low wage jobs would never have been able to amass much money, and would have far less income in retirement.

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Sep. 14, 2010 8:21 pm

What is the value today of your 1982 contributions?

The only case I am interested in is yours, where you insist you should have $2 million,1.7M, 1.5M, 1.3M, 1.1M....

At least we're headed in the right direction.

chilidog
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Jul. 31, 2007 4:01 pm

Pierpont, your comment about homeowners insurance here is off the mark. We are not talking about the insurance part of SS, just the pension part of the program. And your comment about disability insurance is also off the mark, I suggest that the goverment keep collecting enough money to fund that part of the program, which is 10-15% of the current SS taxes. Just like SS now, you would have no choice but to buy that disability insurance from SS. But what a relief to low income earners, their FICA would drop by 89-90% giving them that much more money in their personal budgets.

You tire of the argument because there is no case for the SS pension plan. It is a rip off to everyone. The people who retired in 1945-1965 got all the gravey and the rest of us are still paying the bill.

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Jan. 6, 2012 6:45 pm

Not sure why that number is relavant, remember if I retire now my SS is just about worthless, I could not collect the full amount unitl age 66, and even then it would be discounted because I only worked 30 years, not 35.

But here are the numbers for a person starting on Jan 1, 1981 up to Dec 31, 2010 (sorry I did not get the dates exactly as you wanted, but the time period 1982-2011 would not look much different)

Contributions: $210,000 to date (1981-2010)

What the account would be worth: $923,000 on Dec 31, 2010

Value of SS: Almost 0

So why is this relavant? Only civil servants in Illinois and California have good enough pension plans to retire at 55. You can't retire on SS at age 54 after working only 30 years. Right now I would be a fool to chose SS over an account worth almost 1 million. So what's your point?

Remember all those other numbers I threw at you have 40-45 years of donations, not just 30. Those last 10-15 years of donations make a big difference.

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mauiman58
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Jan. 6, 2012 6:45 pm

OK Polycarp, you make that statement now show me some numbers. I have shown several cases to make my point, you just throw that statement out into the air without backing it up with anything. Take my numbers and cut them in half if you want to. What would you rather have $550,000 or $14,000 a year if you were retiring today?

I know which of those I would take.

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mauiman58
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Quote mauiman58:

Pierpont, for that I will have to start at 1990 for 40 years forward from there. That includes almost 20 years that have not happened. What will the SS tax rate be, what will the max SS wages be going forward, what will the t bill rates be, and what will SS pay in 2030? Quite frankly you can manipulate those assumptions to give you whatever conclusions you want to, so just about any calculation made will be garbage in, garbage out.

THAT'S MY POINT! Your exercise depends on including the abnormally high interest/yield rates of the late 70s and early 80s. Looking back 60 years we don't see anything like those rates. So any general conclusions about SS for retirees who start working in 1990 can't be made any more than for those who started working in 1950. They may well be doing a lot better with SS at our expense because of increased lifespans not expected when their rates were set. Unlike some, I think raising the retirement age is reasonable given advances in medicine. But I also know some jobs take a toll on the body and they well might be spent out at 65.

But one thing we all know is that SS will have to collect more money and reduce benefits in the future. My money says I will not live long enough to see the day when SS is anything other a terrible deal for anyone putting their money into the program.

I'm not too happy with either party's stewardship of the program... or ability to manage the finances of the nation... so if they can't be honest about that, why would they be honest about SS. The GOP is determined to get rid of programs like SS using high deficits/debt as the excuse and the Dems are too cowardly to expose their ploy. So an entire 12 years has now passed since we had a national discussion about what it takes to shore up this program. If you remember Bush in 2000 ran on protecting the surplus, paying down debt... to strengthen SS. If he did the exact opposite, that's telling that his intent was to UNDERMINE SS. Obama was a fool to cut the SS rate because this falls into the trap the GOP set.

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Feb. 29, 2012 2:19 pm
Quote mauiman58:

But here are the numbers for a person starting on Jan 1, 1981 up to Dec 31, 2010 (sorry I did not get the dates exactly as you wanted, but the time period 1982-2011 would not look much different)

Please give me the numbers from 1982 to 2011.

What is so damn difficult about this task?

chilidog
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Jul. 31, 2007 4:01 pm

OK,, here they are 1982 to 2011

Contributions: $218,00

Value of account: $883,000

Value of SS at this point for this poor soul, little or nothing, he is only 54-55 years old and he has only worked 30 years. Correct me if I am wrong, but I think this person has to wait until 62 to get anything, then this person will get around $20K a year if that. Let $883,000 sit in an account getting 5% a year for 7 years and it will grow to 1.2 million adding no new money to the account.

What would you rather have, $20,000 a year or 1.2 million?

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mauiman58
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Jan. 6, 2012 6:45 pm

Are you doing this right?

I calculate 1981 amount to be $123,041 and 2011 amount to be $35,777.

$29,700 x (0.047 x 2) = $2,792 compound interest for 30 years at 13.45%

$106,800 x (.053 x 2) = .$11,321 compounded interest for 30 years at 3.91%

$923,000 (1981-2010) minus $123,000 plus $36,000 is 836,000.

chilidog
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Jul. 31, 2007 4:01 pm

Kudos to your Pierpont, your last paragraph makes some sense. We are talking about elected oficials whose main goal is to get re elected (that's both sides of the aisle). This is what we get, no one wants to tell the truth that taxes have to be raised and/or benefits cut here. That message does not help one get re elected, so no one says it, meanwhile programs like SS, Medicare and Medicaid keep slipping further and further into the red. And the longer nothing is done, the worse it gets.

But just to run one case of a person starting in 1990 and working 40 years, I'll raise the ss max wages 3.5% a year after 2012, and raise the SS payout 2% a year after 2012. I'll assume a t bll rate of 4.75% going forward. But the question is what happens to this 2% tax break that has been in effect last year and this year? I'll run it both ways.

If the 2% tax break gets cancelled the numbers look like this:

SS payout- $36,000

Total contributions- $465,000

Value of an account investing in T bills at the end of 40 years- 1.54 million

Still not a good deal

If the 2% tax break stays in effect until 2030, it looks a little better, but SS is still not a good deal.

total contributions: $409,000

Value of the account- 1.45 million

SS payout is still $36,000 a year

OK, let's assume only a 4% t bill rate going forward and keep the tax cut

Total contributions still $409,000

SS payout still $36,000 a year

Value of account drops to 1.39 milion

Sorry I've tried to come up with a reasonable situation where SS looks good for this time frame and I can't.

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mauiman58
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Jan. 6, 2012 6:45 pm

Chilidog:

Here is the calculation for the years 1982 to 2011

Total max SS contribution in dollars times (1 plus the t bill rate) to the Nth power where n is the number of years to the end of 2011.

The t bill rate is expresse as a fraction, so 10% translates to 0.1 in this equation.

So 1982 looks like this (2964.6) times 1.1276 to the 30th power. This equals $108,797.

$2964.6 is the max SS contribution in 1982 and 12.76% is the t bill rate.

Do this 30 times remembering to reduce the exponent by 1 for each year going forward. I did find an error in my last year, so the actual nuber for the 1982-2011 calculation is about $1,000 less than what I originally stated. Sorry

Set up your own spreadsheet and see if you get the same results. Remember you have to add all 30 years together.

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mauiman58
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Jan. 6, 2012 6:45 pm

I agree with your 1982 figure of $108,797

http://www.myamortizationchart.com/personal-savings-calculator/

I won't quibble about max SS in 1982 being $32,400 when you stated that you made $30,000. The difference is $9,000.

So today you have $836,000 due in multiple installments beginning with $108k at the end of 2012 and ending with $36k at the end of 2041.

In the next 15 years you will add 15 x 110,100 x 0.053 x 2 or $175,000.

So when you retire you will have $1,011,000. That is the absolute ceiling on your account.

Why is it unfair for someone to call you an idiot?

chilidog
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Jul. 31, 2007 4:01 pm

Chilidog, if you are going to put a link in your posts, at least make sure you understand what the link is telling you. You obviously don't have a clue what the link that you provide is telling you.

Take my $800,000 and my age of 54 and enter it. Then put a savings rate of $10,000 a year (that is low, it will be higher than that) and a rate of return of 4% (also low). Now how much money do I have when I hit 69? A lot more than 1 million.

What you did in the post above is not allow any earnings to accumulate past 2012. You obviously do not understand the concept of the time value of money, and I hate to be the idiot right winger that has to point that out to you.

Again if you take your money and bury it in the backyard, SS looks great. That's what you assume I did in 2012 in your last post. Even us idiot right wingers aren't that stupid.

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mauiman58
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Jan. 6, 2012 6:45 pm

I am assuming zero inflation 2012 - 2057. Ask a fourth-grader to explain to you why that assumption is to your benefit.

And that $836,000 includes $35,777, the future value of your 2011 contributions of $11,321 due in 2041.

chilidog
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Jul. 31, 2007 4:01 pm

You're still ignoring earnings from 2012 going forward. Even at zero inflation there is always a time value of money.

mauiman58's picture
mauiman58
Joined:
Jan. 6, 2012 6:45 pm

I'm ignoring earnings on contributions after 2011.

I am counting (or rather I assume you're counting) your locked-in rate of 3.91% on your 2011 contributions until 2041.

Maybe your earnings will be beat inflation, maybe they won't. Consider that you can only invest the biggest chunk of your account, your 1982 contributions, in 2012's Bernacke-inflated market. Which by definition is less than the marketplace's anticipation of future inflation.

If you insisted in the face of cogent arguments that the floor on your SS contributions was at least $1.5 million and the actual ceiling was no more than $1 million, doesn't that make you an idiot?

chilidog
Joined:
Jul. 31, 2007 4:01 pm

Sorry man you make no sense. What happened to the return on the $800,000 I have in 2012? Where did it go? Remember I bought 30 year t bills every year, so a lot of that $800,000 still is getting t bill returns well above 4% until the bond in question expires. And I guess you are arguing that all of a sudden in 2013 going forward that the US government will be able to borrow money and have to pay no interest on their bonds. That's quite an assumption!

Again, you obviously do not understand the relationship between inflation and the time value of money. Inflation has NOTHING to do with this calculation, only the projected SS payout in 2027 and the expected value of an account invested in T bills, what it has grown to in 2027.

Still you argue with me when there are aspects of finance that you are COMPLETELY in the dark about! Until the light comes on in your head that inflation has nothing to do with this discussion you will continue to make the argument that SS is not a bad deal. I'll tell you what, you take SS and let the rest of us that have passed a college level economics and finance class (in my case a masters level class) make our own choice. Sorry buddy, you obviously have not done that, I can tell by the logic you use.

mauiman58's picture
mauiman58
Joined:
Jan. 6, 2012 6:45 pm

I'm not arguing whether you're getting screwed by SS. You are.

I'm arguing with your asinine insistence that you could have as much as $2 million, no less than $1.5 million if you invested your SS in 30 year treasuries.

"So today you have $836,000 due in multiple installments beginning with $108k at the end of 2012 and ending with $36k at the end of 2041." Isn't this what your numbers show?

chilidog
Joined:
Jul. 31, 2007 4:01 pm
Quote mauiman58:

Polycarp at some point people have to take responsibility for themselves and not be dependant on the government for every little thing.

Alleviating the fear of destitution in your old age is no little thing.

Laborisgood's picture
Laborisgood
Joined:
Jul. 31, 2007 4:01 pm

No, my numbers show that I would have about $800,000 (lump sum) now and that will double in 15 years if I keep dumping in $10,000 a year for the next 15 years. My guess is that SS will pay me about $45,000 a year. Sorry I would rather take the 1.6 million (lump sum). Cut both those numbers in half to mimic someone who made half the SS max and SS is still a bad deal.

Remember money will double in 15 years at 4.5%. You may argue that 4.5% as a little high going forward, but not much. And that does not figure in the $10,000 (and it will probably be more) a year I will be donating to the cause every year for the next 15.

mauiman58's picture
mauiman58
Joined:
Jan. 6, 2012 6:45 pm

Wow, how much SS are you getting? My 93 year old mother in law must have missed that boat. She is now living with us because her son (my brother in law) mis managed her money and now she is down to about $1,000 a month SS survivors benefit. Nothing in the bank. Guess where she is living now, my garage.

Don't worry, we did put a bed out there for her.

The lesson there is you'd better have more going for you than SS!

mauiman58's picture
mauiman58
Joined:
Jan. 6, 2012 6:45 pm
Quote mauiman58:

The lesson there is you'd better have more going for you than SS!

No reasonable person would argue that having more than SS is a good plan, but many people can't. People at the bottom will not be investing money they aren't forced to pay to SS as wealthier people may. They will be using it to survive. Any good conservative would say that if SS is insufficient in the future, let's get rid of it today. I say let's improve it.

The lesson there is you can minimize the fear of destitution tomorrow via a social safety net such as SS or you can take that money now to minimize destitution today. SS is not a program aimed to help people who are fortunate enough to invest additional money beyond what they put into SS. It is aimed to keep millions of not-so-fortunate people from hitting rock bottom.

Laborisgood's picture
Laborisgood
Joined:
Jul. 31, 2007 4:01 pm

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Who Should an Economy Serve?

The top one percent own half of all the world's assets. In stark contrast, the bottom fifty percent of the world owns less than one percent. According to the 2014 Global Wealth Report from Credit Suisse, global inequality has surged since the 2008 financial collapse. The report explains that while global wealth has more than doubled since the year 2000, the vast majority of overall growth has gone to those who were already wealthy.

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