Tuesday, October 9, 2007

How big of a scam is Social Security?

As I am gearing up to switch jobs in the next couple of weeks I have taken some closer looks at my retirement situation. I am in my early 30s so I am well off from the 10:30am M-F tee time at Boca del PlayaVerde golf course in Geezervile, Florida. I am making my retirement plans based on the assumption I will see $0 in SS payments. Either the monster will die within the next 30 years or by the time I go to collect I will be told I am too "rich" and no longer qualify. Never mind that I pay in in all these years.

According to the SSA website if I max out contributions over 45 years, I will get $8061 a month when I turn 67. Assuming I live for 30 years (big assumption) I will receive 360 payments of $7953 or a grand sum of $2.9M. Not bad right? WRONG! No compare that with taking the 12.4% I contribute every year and investing it myself in a simple 5% a year money market fund or something else like that. US Treasuries, bonds, whatever else is there that is 100% safe. Using the same adjustment for inflation the SSA uses, I would end up with $3.4M. Right off the bat I am up $500,000.

But it gets even worse.

First off, that $3.4M would be my money when I retired. If I die at 67 and 1 day, I have $3.49M that I can leave to my family. With SS all my wife gets is 1/2 of my SS check. That $3.4M would continue to grow over the 30 years I am retired and if I am smart about it could end up with $1M+ when I kick the bucket which I can leave to my kids, charity or whatever. With SS I end up with $0. With Social Security I am taxed twice on the same money. The 12.4% the gubermint takes from me is also taxed. Then when the gubermint graciously gives me my SS money they tax it again. Were I to take that 12.4% and invest it in an IRA or 401k I would only pay tax once. So right off the bat the gubermint is not going to allow me to take that path.

The media and particularly the Democrats have done a tremendous marketing job convincing people that SS is a good deal and the program must be saved at all costs. And most Americans believe these lies unfortunately. While Bush hasn't done much in his second term, he was right on this issue. Privatization is the only logical solution for retirement. Unfortunately the US is 2/3 of the way down the socialist path and privatization and socialism don't work all too well. Even so called conservative politicians ran away from this issue.

So enjoy paying 12.4% of your income every month folks, I know I will knowing I am losing money every day.

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