Social Security example
Filuwaúrdjan:
Quote from: Wakie on January 31, 2005, 05:12:58 PM
You know the British have a private version of Social Security and, I'm told, it is failing quite miserably.
Our pensions system is weird: basically everyone gets/can get a state pension (something like £80 a week IIRC. I don't know the exact number but it's around that) which was linked to earnings until the '80's.
I think some banks and/or building societies do pensions, but I'm not sure.
Employers of big firms are supposed to give their employees a pension as well (I'm not sure of exactly how everything is funded) and in practice this means the stronger the union, the better the pension (public sector pensions are excellent as a rule). Problem is a lot of private firms are folding their pension plans to "save money" (translation: give themselves big fat pay rises and share options) and less and less people are getting themselves pensions, causing a lot of people to worry.
I think most of that's right. Some of it's probably wrong. Just don't quote me on it, alright?
Trilobyte:
Quote from: David S on January 31, 2005, 04:36:44 PM
Social Security example
Since 1972 my contribution to Social Security has been $93,000.
My employer, as required by law, contributed an equal amount for a total of $186,000.
Adjusted for inflation that amounts to approximately $270,000 in 2003 dollars.
If the money had been invested at 5% compounded interest it would be worth $356,000 today
If it had been invested at the going rate for AAA corporate bonds it would be worth $556,000 today
If it had been invested in stocks with returns similar to the NASDAQ it would be worth $913,000.
Now here's a problem for the math/computer wizards.
Assume David S had been able to invest his money in AAA corporate bonds instead of SS so that today he had the $556,000. David's evil twin, Opibo insists that social security is better and puts his money there. Both retire this year so they no longer contribute to SS. Opibo is not eligible to collect Social Security until age 62 in 2011, at which time he will receive about $15,000. That amount is projected to increase 2% per year.
David invests his $556,000 in corporate bonds which pay about 5%. In 2011 Opibo begins collecting Social Security and David begins withdrawing an equal amount from his investment.
Assuming both of them live to be 100 in 2049 how much will each of them have collected? How much if any will David have in his investment account? Where would you rather put your money?
Disclaimer- The names and places used in this story are fictious. Any similarity to persons living or dead is purely coincidental. :)
For every person who gains $700000 from NASDAQ there are many more who lose their entire fortune. If only we could all retire as millionaires.
How many people you know voluntarily saves away $93,000 over the course of their lifetimes? Most people would have spent every last penny and have no savings by the time they retire.
Wakie:
Quote from: David S on January 31, 2005, 05:30:20 PM
Quote from: Wakie on January 31, 2005, 05:12:58 PM
You know the British have a private version of Social Security and, I'm told, it is failing quite miserably.
Here's the cold hard reality. If you need social security then you aren't competent to manage your own money and will probably lose it in a privatized system.
Is protecting incompetents a justification for punishing those who are competent?
Why should the strong protect the weak? Why should the smart help the stupid? Because it is the right thing to do.
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Some of them absolutely are. If they weren't then they would have invested their own private funds already and built up a retirement fund and wouldn't need to worry about Social Security.
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In some cases, absolutely. As for the $7 trillion debt ... talk to Borrow and Spend George.
David S:
Quote from: Trilobyte on January 31, 2005, 05:49:08 PM
Quote from: David S on January 31, 2005, 04:36:44 PM
Social Security example
Since 1972 my contribution to Social Security has been $93,000.
My employer, as required by law, contributed an equal amount for a total of $186,000.
Adjusted for inflation that amounts to approximately $270,000 in 2003 dollars.
If the money had been invested at 5% compounded interest it would be worth $356,000 today
If it had been invested at the going rate for AAA corporate bonds it would be worth $556,000 today
If it had been invested in stocks with returns similar to the NASDAQ it would be worth $913,000.
Now here's a problem for the math/computer wizards.
Assume David S had been able to invest his money in AAA corporate bonds instead of SS so that today he had the $556,000. David's evil twin, Opibo insists that social security is better and puts his money there. Both retire this year so they no longer contribute to SS. Opibo is not eligible to collect Social Security until age 62 in 2011, at which time he will receive about $15,000. That amount is projected to increase 2% per year.
David invests his $556,000 in corporate bonds which pay about 5%. In 2011 Opibo begins collecting Social Security and David begins withdrawing an equal amount from his investment.
Assuming both of them live to be 100 in 2049 how much will each of them have collected? How much if any will David have in his investment account? Where would you rather put your money?
Disclaimer- The names and places used in this story are fictious. Any similarity to persons living or dead is purely coincidental. :)
For every person who gains $700000 from NASDAQ there are many more who lose their entire fortune. If only we could all retire as millionaires.
How many people you know voluntarily saves away $93,000 over the course of their lifetimes? Most people would have spent every last penny and have no savings by the time they retire.
Are you unable to save your own money unless government forces you to do so? Right now government takes the money in the form of payroll tax. You already have the money forcibly taken from you. What I am saying is you could invest the money instead of giving it to them. If you don't have the discipline to do this on your own possibly you could have the government force you to invest it in something secure such as AAA bonds.
A18:
What are AAA bonds?
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