Speaking of the Heritage Foundation
, everyone who's at all curious about Social Security and where it's headed should avail themselves of the Foundation's calculator
. Enter your age, gender, zip code, and income, and it will tell you how much you'll contribute to the system over the course of your career, and your expected benefits when you retire. It will also compare those results to the contents of a hypothetical private retirement account should passage of Social Security privatization come to pass. My results looked like this:
Taxes paid in to SS: $517,907
Monthly benefits: $2,939
Which, given retirement at 67 and, um, expiration at 80, would yield a -0.39% return on my "investment". You read that right: negative point-three-nine percent. I'm one of those lucky individuals who would pay in more than I would get back out.
Compare that to the hypothetical personal retirement account:
Contributions made (assuming all 6.2% of my SS payroll tax) are the same at $517,907
Total Value at retirement (assuming 50% holdings of stocks at 7% return, 50% holdings of T-bills at 3% return): $1,471,597
Monthly benefits (assuming I convert the total value into a 4.83% return annuity): $11,987
But what about my kids and grandkids? Social Security's death benefit is something like $500 these days. Nice. Or if I went with the personal retirement account I could halve the value of the annuity, cut my monthly benefits to $5,994 and leave the rest invested, to grow from $735,798 back to $1,369,528 by the time I'm 80 and leave it to my heirs.
So lemme sum up, I can:
A) go with Social Security and (assuming it's still solvent in 2042) live on $3K, leaving $500 to my heirs when I breathe my last, or
B) take control of my own destiny and live on $6K, leaving $1.3M to my heirs.
Gotta think about that one for just a -- thought's over! I'll take Door #2, Pat.