Social Security Private Accounts

Posted by JCoke at Daily Pundit



He makes some incorrect assumptions. In point of fact, my calculator says that a person contributing 12.4% of a $20,000 yearly salary makes monthly contributions of $206.67 and if this earned interest at 5% over 45 years the value would be expected to come in at $418,797. There should be no tax consequences for rolling this into an annuity, where it continues to earn interest tax deferred. Assuming 5% Rate of return, something you can find fixed annuities at, a payment of $2248 monthly would be a 30 year fixed payout (not a "life with 30 years guaranteed"). If this is then taxed at 15%, this would be a net of $1910 per month, $22920 per year net to the person. This still loses to long-term inflation by a tad, but not nearly so much as Social Security.



Now if you computed it based upon 8%, far more realistic for a market investment, you get a nest egg of $1,090,089, which gives you $7998 per month, which even taxed at 28% gives you a net of $5759 per month, approximately $69,100 per year, which does substantially better than long-term inflation.



Note 1: It's the 45 year period which is the real enabler here.



Note 2: historical long term returns in the stock market have been closer to 10%, in which case, even taxed at 40%, the monthly net is $11982.



Note 3: Every insurance company has it's own mortality tables which have been revised upwards in recent years. I'm unable to locate a web based one which doesn't require your personal information. Looks like I've got to check some old connections.