Can You Outperform Social Security?

By on February 6, 2013 in Current Events, Retirement with 70 Comments

The average worker in America has 6.2% in Social Security taxes withheld from each paycheck. This money is given to the government with the understanding that it will be returned to the worker in his or her retirement years for living expenses via a set monthly payment.

However, is it possible for an individual to earn more money for retirement than the government would pay by investing that same 6% on his own?

I recently came across an interesting hypothetical scenario that says that it is indeed an achievable possibility. On his radio show last week, personal money management expert Dave Ramsey outlined a compelling case for the power of compounded returns in long term investing.

He said it is not only possible for an individual to earn better returns than Social Security, but that one can in fact end up with far more money in retirement by investing a set amount each month over the course of a working lifetime.

Here was the scenario as Ramsey presented it:

He assumed that an individual who works 40 hours per week makes $8 per hour. That would amount to $1280 earned each month (40 hours x $8 x 4 weeks/month). The portion you pay into Social Security is 6% (rounded off), so that represents $76.80 of that monthly $1280.

Ramsey then states:

“If you make $8/hr your entire life and you were to save $76 a month from age 20 to age 70, your working lifetime – 50 years, and you did that in a decent growth stock mutual fund, here’s what you would have: you would have $3 million at your death, which by the way if you were to live on 8% of $3 million, you would have an income at retirement at 70 years old of $20,000 a month having never made more than $1200 a month. If I’m half wrong, I would have to be 90% wrong, to get down to the [monthly amount paid by the] Social Security system.”

Ramsey also added that when you die, your family doesn’t get anything from Social Security, but if you die with $3 million in savings, it is passed along as an inheritance which will help your surviving family members.

He also pointed out that this example assumes the person makes $8 an hour his entire life with no raise, an unlikely scenario since most employees will get several raises over the course of their lifetimes. The incremental raises would of course allow for saving even more each month since the employee’s income would be greater, thus potentially pushing the $3 million dollar ending balance up much farther.

What kind of a mutual fund is Ramsey talking about in his example? He routinely says that he looks for growth stock mutual funds with long (10 year or more) track records that show the fund has earned, on average,12% or more each year over its lifetime. He even provided examples of two such funds recently, The Investment Company of America Growth and Income Fund and The Growth Fund of America.

Federal employees have the TSP at their disposal to help them invest in precisely the same manner that Ramsey is advocating. Regular contributions from their paychecks go into the funds, and for FERS employees, the government will even offer some matching contributions to boost the regular contribution amounts. This can amount to big returns over the course of a federal career. Y9u can look at the annual returns of the TSP funds going back as far as 1988 to get a feel for how they perform long term.

But can the slow and steady approach to the TSP create millionaires? Some federal employees have done it – see 208 TSP Millionaires Enjoy a Big Return in January.

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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  1. saywhatagain42 says:

    One thing wrong with Dave’s scenario (and there may be more): We can’t invest in “The Investment Company of America Growth and Income Fund” and “The Growth Fund of America” growth stock mutual funds through TSP.

  2. Rikker59 says:

    I’d like to see social security contributions doubled for both workers and employers to create a real National Retirement Program to combat poverty among our retired elderly. Social security needs to be overhauled to tax all sources/categories of income (other than disability or retirement payments) without any income caps.

  3. Chuck Bucks says:

    In 30 years I can make a whopping $20k every year? Woo-hoo!

    Using the inflation for the last 30 years, those $20,000 I would make, 30 years from now, would be worth $8,500 in today’s dollars.

    That $3 million nest egg would be worth $1.28 million in todays dollars. Taking 4% of that each year (so it should last 30 years) would yield $51,000 in today’s dollars, which is a much better standard of living than the $20k in interest.

    None of this would make up for 30 years of living (surviving) at 1.5 to 3 times the US poverty level ($11k in 2012).

    Final thought: the first fund has a 0.61% annual fee (which isn’t actually bad, unless you lost money all year and they take their cut, anyway), a max 5.75% sales fee (which is bad), and, “investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower,” so they play games with their numbers to make some funds shine. Sixty percent of actively trading funds (like these two) can’t beat the market 50% of the time, because those money managers have to pay college tuition bills just like we do (only at better colleges). You are better off getting a second $8 per hour job and investing in a Vanguard index fund.

  4. Spunkis says:

    A 12% annual return is unrealistic.  By comparison, the TSP “C” fund has an annual return average of 9.50% since it’s 1988 inception.  This article has other holes, such as adjustments in the FICA contribution rate and SS wage limits over time, that need further scrutiny.  

    • AppleFanboy78 says:

      Plenty of funds average 12% per year (or more). It simply takes a little bit of research on your part to find them. Vanguard’s Windsor fund, for example, has averaged just shy of 12% since it’s inception: https://personal.vanguard.com/… The S&P 500 (which the C fund tracks) has averaged 12% per year over its lifetime.

      • Medion says:

        The S&P 500’s total annual return (including dividends) annualized to 10.47% currently (as of this post, subject to change). Ramsey has always used unrealistic numbers for his annual stock returns and has been proven wrong numerous times.

        I love Ramsey for his get out of debt advice, for those who need it, but his investment advice has been terrible. And no, there are no free lunches. You will not likely pick a stock fund that beats the market for the life of your investment.

        The most realistic way to project performance, assuming 100% stocks (not a good idea for the life of the investment, but let’s roll with Ramsey’s advice) is to conservatively estimate 9.5% annualized growth after expense ratios, and then reduce to about 6.5% to account for inflation. Assuming (we’re doing a lot of this) that the employee making $8/hr does in fact put away $76/month ($912/year) for 50 years, you would end up with $333,324 in today’s money, a FAR CRY from Ramsey’s unicorn theory.

        In short, don’t ever follow Ramsey’s advice for investing. It’s straight up BS.

  5. sandiegoret says:

    This analysis is very skewed in favor of private investment and makes several very questionable claims.  Particularly it relies on after the fact analysis in picking investments that would earn 12% on average over the life of the worker.  Yes, there are people who probably could pick the right funds and invest in such a way that they would make more by private investment than they would on social security.  However, the large majority of workers could not and would not make such investments and whenever we would have an economic down turn (like the last few years) experience shows they would get out of the investment market at the wrong time.  It’s not about personal brilliance in investing it’s about taking care of people who would otherwise by left behind.

    The article also fails to mention that social security provides not only retirement benefits but also survivor and disability benefits as well as Medicare.  For those workers who die or become disabled at an earlier age this is a far more significant benefit than individual investment.

    Finally, for those more conservative commentators who say that social security just shifted the responsibility for retired workers and survivors from the family to the government–that is nonsense.  The reason why social security came about and is such a success at reducing poverty is that families were not taking care of the older generation (no value judgment intended).  Face it–times have changed and we don’t all live on farms anymore–the nature of our society has shifted, the nature of our family structure has shifted and the nature of employment has shifted and this chipping away at programs like social security without providing something meaningful to replace it that will work for the majority of people is only giving the money back to the very rich and hurting the regular workers.

  6. Pat says:

    Social Security is an *insurance * program, not a savings program. What if the hypothetical worker got injured and disabled 15 years into his career?  If not for the Social Security insurance program, he would be out on the street.  The savings plan Ramsey suggests *only* works if you are healthy able bodied for all your career.  Stupid idea if you ask me.

  7. Bearwhiz65 says:

     ….”and you did that in a decent growth stock mutual fund”

    TEE-HEE, yea, right…what % “growth” are you using?

  8. Progressiveist says:

    So what happens if a huge chunk of your savings get wiped out by a recession just when you need to start drawing on them? What value does he assign to the near zero risk of SS defaulting or lowering benefits?

  9. Progressiveist says:

    lol he assumes 12% a year for 50 straight years! As if we can assume that would actually happen. Obviously his ideology is blinding him to new fiscal realities.

  10. RasDadies says:

    Great Dave Ramsey. Your myopic vision is perfect for all SS contributors? No.

    I hope you do not die and leave a widow and kids before your retirement nest egg is fully funded or more to the point let’s hope you are one of the lucky ones and do not become disabled with a spouse and kids under your roof.  It is pretty easy to pick one aspect of the SS program and beat the odds but there is a reason it is called social insurnace and not an IRA. There is nothing individual about pooling your risk.

    Follow the advice given earlier, study the aspects of what Social Security does and look at more than one guy’s opnion before forming your own.

  11. RealityCheckInvestor says:

    Can’t believe no one is commenting on the actual math presented in this glorious savings plan.  12% growth per year for 50 years?  The stock market average over the long-term is only 10%, and there are plenty of downturns that can wipe out your savings at exactly the wrong time.  Yes, last year was a good year, but over the last 13 years the average growth of stock was only 3.4%.  Not to mention that only investing in stock is really bad advice.  A balanced portfolio, heavy on stock in your youth, and moving to less risky investments as you get close to retirement won’t yield anywhere near 12%.    Try using a more realistic calculator.

    BTW–don’t forget to subtract the value of the premiums you’d have to pay for the disability insurance policy that is also provided by your Social Security taxes.  Now how much do you have to invest?

    • Kegler299 says:

      Good comment on the disability insurance policy, but using SS’s own return rates shows that we only receive about 1/3 of the accounts earnings. This doesn’t even account for the employers 6% contribution!

  12. RealityCheckInvestor says:

    Can’t believe no one is commenting on the actual math presented in this glorious savings plan.  12% growth per year for 50 years?  The stock market average over the long-term is only 10%, and there are plenty of downturns that can wipe out your savings at exactly the wrong time.  Yes, last year was a good year, but over the last 13 years the average growth of stock was only 3.4%.  Not to mention that only investing in stock is really bad advice.  A balanced portfolio, heavy on stock in your youth, and moving to less risky investments as you get close to retirement won’t yield anywhere near 12%.    Try using a more realistic calculator.

    BTW–don’t forget to subtract the value of the premiums you’d have to pay for the disability insurance policy that is also provided by your Social Security taxes.  Now how much do you have to invest?

  13. RealityCheckInvestor says:

    Can’t believe no one is commenting on the actual math presented in this glorious savings plan.  12% growth per year for 50 years?  The stock market average over the long-term is only 10%, and there are plenty of downturns that can wipe out your savings at exactly the wrong time.  Yes, last year was a good year, but over the last 13 years the average growth of stock was only 3.4%.  Not to mention that only investing in stock is really bad advice.  A balanced portfolio, heavy on stock in your youth, and moving to less risky investments as you get close to retirement won’t yield anywhere near 12%.    Try using a more realistic calculator.

    BTW–don’t forget to subtract the value of the premiums you’d have to pay for the disability insurance policy that is also provided by your Social Security taxes.  Now how much do you have to invest?

  14. SmokeyBear says:

    Duhh! Started in 1975. By 1989 my outside investment income was more than my GS 5 Wages. Today, a GS 9, it’s a funny feeling knowing your doing better than management. Your always happy. No politics ilnvolved when you succeed on your own and by yourself.  The magic of compounding. There is no need for Social Security for someone like myself. Cheers!

  15. TheCogitator says:

    “The average worker in America has 6.2% in Social Security taxes withheld from each paycheck.”

    Actually this is wrong, and it is even worse than portrayed in the article. Since the employer adds another 6.2% the actual amount is 12.4% that could be invested.

    Social Security is the largest Ponzi scam ever. Also it is just a tax that can be spent on whatever the government wishes. There is no obligation on the part of the government to give retirees anything.

  16. hoop77 says:

    The point that is missed here is the amount of “YOUR MONEY” that you would have in “YOUR” account and not having to rely on the small amount you get from SS. It is your money to do with as you please. I know how many people won’t save? So be it, it’s their fault not the taxpayers. I would keep paying into SS and when I reach 62 waive my benefits if my kids could opt out of it now and pay into their own account. SS is a ponsi sceme, and lets not mention those that are on SSI.

  17. enigma1083 says:

    The article fails to mention the employer contribution. I think I could have out performed social security if I had the investment knowledge, discipline, and perspective that I have at age 50+ at the age of 25. Most people don’t have that, and judging by the account balances of the majority of  boomers many do not yet have that knowledge.
    Social Security has been a success, at least as measured by the  numbers of the elderly not living in poverty. 
    I do not think it is viable to privatize it till there is more understanding of financial management by the general population.

  18. steve5656546346 says:

    If you just read the Social Security web site, you will see that the system was set up as part of a social security and welfare movement.  It was explicitly intended to address such problems as a woman working at home all her life, and then having nothing if her husband died.

    Do you imagine that the first recipients were not until 20-30 years after Social Security was formed?  No, pay outs started almost immediately.  But where did that money come from?  Those that were CURRENTLY working at the time.  So, these (then) current workers were not putting in money for themselves?  Nope.

  19. grannybunny says:

    Sure, it’s theoretically possible, but, realistically, most people grossing $1,280/month are living paycheck-to-paycheck, and few — if any — would be able to routinely invest $76.80/month, year in and year out, much less find a totally safe investment vehicle. 

    • Raymond_ard says:

      They are routinely “investing” 76.80/month now as a deduction for SS and have no choice to afford it or not.

    • 5YTG says:

      They may be paying taxes of 6.2%, but if they had the money, many would spend it. If they were making 5 times the amounts listed, many would still spend it. We have a nation of spenders, and when they run out of money and time, the go on Social Security anyway, and complain about how little it is. I’ve known too many people who ended up destitute because they were self employed and played games with their earnings to minimize payments and taxes, then ended up too poor to survive on their own. Maybe there is a better way, but allowing people to take the money and do for themselves is not an option until you are willing to walk over those starving in the street.

  20. msgrowan says:

    I think it would be instructive to study the results of the suggested approach as it has  been implemented in other countries, e.g., Chile, etc.  GAO did a study a number of years ago on this subject, and found that, in general, the outocmes were more favoarable than those where the national government itself administered such programs.  However, much fiscal water has passed under the retirement planning bridge since then, and an updated review is urgently needed.  Any such initiative, however, that would seem to even open the possibility of considering seriously the privatizing of Social Security here would doubtless encounter fierce and unrelenting opposition.  That’s a pity, because we need to at least consider a broad range of potentially viable options for curing what ails Social Security.  I’m not personally advocating privatization at this point, as the suggested necessaryand updated fact finding has yet (if ever) to be done, but we should be open to exploring other retirement planning paradigms, given the increasingly shaky status of our own current model. 

  21. ReaperComing says:

    That is true Oldfed but instead of paying back what they STLOE i’m sorry borrowed!! they say we cannot pay waht we had promised so just suck it up and be happy! I could be 10 times better off if i had in aRoth invested all my SS money. You are correct most of the 47% would spend their foolishly and ask foa another hand out, which our government would give them. So the hard workin  intelligent guy gets the shaft again.

  22. Captainrich says:

    If I could invest my S.S. withholding funds, I would put the money in the TSP G Fund where it will be safe from greedy congressmen. 🙂

    • ThatGuy says:

      Except that the G-Fund is the one Congress/the Treasury is currently borrowing from because it’s tied to US Securities which they can supposedly replace.

    • Norm from GA says:

       Why not just put it all in savings bonds…or buried in a hole in your back yard or mattress?

      The G-fund will never keep up with inflation, let alone with the other funds.  If you don’t believe me, check out its share price compared with the other funds, some of which had begun years after it.

      The scary part of the TSP picture is that not just how many FERS Feds don’t invest at least five percent into their account, but the number who are so risk-adverse, or ill-informed, that they keep most or all of it in G-funds, even though they are decades from retirement.

      The problem with Ramsey’s scenario is that, given the opportunity to invest their own money as they wished, the workers who could least afford it, would probably deposit their money into passbook accounts, savings bonds, or, conversely, into precious metals, real estate, or Internet dream schemes from Nigeria, none of which will net the 12% per year growth he presumes.

  23. Fed Up! says:

    “TSP funds going back as far as 1988 to get a feel for how they perform long term.”   Yes that was about 0% after the Bush crash.   And “far back to 1988”, is not a 30-40 year working lifetime.  The guy has his head in a very dark place.  

    • Norm from GA says:

       If your funds went to zero “after the Bush crash”, you probably subscribed to the herd mentality that says, “when things look bad, convert it all to G funds.”

      To the rest of the world, that is known as the “buy high, sell low” road to poverty.

      • Fed Up! says:

         your funds don’t have to go zero norm, but many were cut in half or more, will ruin your retirement plans and take 150% to make back what you had.  And no, my TSP did just fine, because I don’t follow the herd here on FS as my anti-RW nut comments should tell you.   If I was totally dependent on TSP or SS it sure wouldn’t be invested where the herd lead by W and ‘WS Titans’ could take me over the cliff with them.  

  24. Fed Up! says:

    Lets say you invested that money for 35 or 40 years in the TSP stock index funds and it has its ups and downs over that period.  Then lets say Bush III or Hoover II gets elected about 3 years before you retire and deregulates Wall street.   Enough said.  

    • Fed_Peasant says:

      Good point & add to that the “black swan” events in the markets (flash crash).

    • ReaperComing says:

      The government fixin to take all that TSP money anyway! you will get a choice keep your TSP and no Social SEcurity of take social security and we get your TSP money, look at what the country of Hungary did to their people.

      • Fed Up! says:

        Then it won’t make any diff if its invested or not.  You are doomed, I’m not.  Of course if the R-TP wants to take my TSP away I still have my gun rights.  

    • little taxpayer says:

      run the numbers.  You would still be much better off than if you rely on SS.

      • Fed Up! says:

        You’re not supposed to rely on SS.   Its set up to be the safety net when all else fails and you’re out of money. 

        • Pat Fucile says:

           While you are correct, you were never supposed to rely on SS as your sole retirement, but you are wrong when you think is for when you run out of money.   SS was set up to supplement a person’s retirement savings.  

  25. Fed_Peasant says:

    Ramsey is trying to sell books & he has not convinced me, to buy his next book….or a previous one.  His model is too good to be true, starting with the 12 percent+ ROI.   SS should have supplemental accounts like an IRA/TSP/401K/403B, to be an add on to the established SS.  But if they tried that, some factions in congress would see that as a green light to privatize the whole thing.

    • hoop77 says:

      I would have agreed with you 3 years ago about Ramsey. However the wife and I recieved a present from her parents to attend Dave’s Seminar. Gotta tell ya three years later living debt free is a good thing.

      • D Byte says:

        Ramsey has lots of good ideas and means well for those who have financial literacy or have the aptitude to obtain financial literacy. But the sorry tale was told in the WAPO many years back and has probably eroded since – Only 33% of the population can compute compound interest.  I would say that compounding is a first step in a well rounded underrstanding of financial principles.  Not much can be done without that knowledge to fall back on.

        That is why the employer gradual retreat from defined benefit pension plans and into 401K plans is such a bad policy move. Taking investment decisions out of the hands of Pension Trustees and laying it on each individual is bad for 66% of the populace.  That’s where SSA saves the day!

  26. $15300432 says:

    I can never recoup all that I have paid into SS. However illegals and a host of others are living on easy street

  27. TheRealOldFed says:

    Without Social Security, old people will be starving in the streets. Why do you think it was started in the first place?? People having to work until they die. Most people don’t have the investment knowledge to do better than SS. If Congress would just stop stealing all the money allocated to SS, like they have been for 30 years, there would be plenty to pay benefits.

    • $15300432 says:

      That wasn’t the case until folks thought that socialism was better than capitalism. Once that happened folks dumped their responsibility of caring for their families on others

    • Pat Fucile says:

       Even if Congress had not been raiding the “lockbox” and using the SS funds, there would not be enough to pay for all the benefits.   You see, SS was set up as an inter-generational transfer fund.     The very first person to retire and start collecting SS benefits (a woman) collected everything put in her name back in her very first check.   The average retiree today  gets back everything in about 3 years yet most live much, much longer after retirement.    That means the current workers funds are paying for the current retirees.   Even with the SS benefits, if the current retirees didn’t save otherwise, they are still screwed because you can’t afford much of anything on what little SS pays.   

      • ReaperComing says:

        that isn’t true! if every dollar yours and emploers was in the lock box it could pay all that was promised and have some left over

        • steve5656546346 says:

          Read the Social Security web site:  you are ill informed.

        • Pat Fucile says:

           Wow, you have absolutely no clue do you.   When SS started there were twenty workers for every retiree, now there are 2.     I did a big paper on SS when I was in college, and the BS you are spouting is an out and out fallacy. 

      • Raheem40 says:

         if you looked at the percentage of those who die before collecting full SS benefits, and the investment of monies collected we would have more monies to use in the retirement system, just do the math .

        • Pat Fucile says:

          I hate to tell you this, but you are wrong.   First off, they don’t invest the monies, they spend it.   Second, since the vast majority of people live well past retirement age.   The percentage of people who die before collecting their full SS benefits don’t even come close to offsetting those who collect more.  

          How much do you earn while on Social Security? The answer largely depends on when you retire and how much you’ve earned over your lifetime. Consider a single man who earns the average wage throughout his career ($43,100 in 2010 dollars), works every year from age 22 to 64, and then retires at age 65 in 2010. Over his lifetime he has paid $345,000 into the system. But he is likely to get back $72,000 more than that, or $417,000 in Social Security and Medicare payouts, according to recent Urban Institute calculations. A single women with the same work and tax history will come out even further ahead due to her longer life expectancy, likely netting $464,000 in lifetime benefits, which is $192,000 more than she paid into the system. These amounts are in constant 2010 dollars and assume a 2 percent real interest rate. Medicare benefits are the main reason most workers are coming out ahead. A male earning the average wage throughout his working life who retires in 2010 paid $55,000 into the Medicare trust fund, but is likely to receive $161,000 worth of Medicare benefits, the Urban Institute found. In contrast, he pays $290,000 in Social Security taxes throughout his career and collects $256,000 in retirement payments.

          Married couples generally benefit the most from Social Security and Medicare payments, especially when one spouse earns significantly more than the other. A two-earner couple with one spouse earning the average wage each year ($43,100 in 2010) and the other spouse earning 45 percent of the average wage annually ($19,400 in 2010) who both retire in 2010 will get back $300,000 more in retirement benefits than they paid into the system. A couple with this earnings history would pay $500,000 in
          taxes over their lifetime, but get back $800,000 in benefits.

          When both members of the couple earn the same average wage over their working life, they get back $192,000 more than their tax contributions. In this case the spouses paid $690,000 in Social Security and Medicare taxes and are likely to get $882,000 worth of benefits in retirement.

          For the record, I majored in Mathematics.   So next time before you get snarky and tell somebody to do the math, be sure you know who you are talking to.   Especially when the math major you get snarky with did a major research paper on the Social Security paper while in college.

          • OldRet says:

            ” Consider a single man who earns the average wage throughout his career ($43,100 in 2010 dollars), works every year from age 22 to 64, and then retires at age 65 in 2010. Over his lifetime he has paid $345,000 into the system. But he is likely to get back $72,000 more than that, or $417,000 in Social Security and Medicare payouts, according to recent Urban Institute calculations. “

            Not arguing but isn’t the $345K (in 2010 dallars) paid in about equal to the $417K taken out over the next 20 years when inflation is considered on the $417K being paid out. As far as being a Math major don’t expect messgge board posters to take any education or research you have done into account. Everyone thinks they’re an expert on these discussion groups. I was a weathter forecaster and studied climate change for many years back in the 70’s but have been called anything from “Don’t know what you’re talking about”, “I have a feeling you know very, very little about this topic” to “Seriously, you should not talk about this topic. You spread dangerous misinformation” when I experess my views and knowledge about the subject and tell people to have an open mind.

        • Pat Fucile says:

           Oh and another thing you forgot about.   For those people who die before collecting their full benefits, if their SS payment was higher, the spouse gets the option of collecting that benefit instead of their own.   If the person dies before their children are grown, the kids get SS benefits until a certain age.   You also forget SSI disability.   Can’t work any more, you get benefits for life.  I personally know one person who has never worked a day in their life but gets SS disability benefits, and in fact started getting them at age 12 because of the disability.  

    • LateBoomer says:

      True for folks at the beginning.  After the rates were raised to 6.2% during the Reagan administration, recent studies have shown that those late boomers will not get all they put in.  Something like $600K put in and $560K taken out, if I remember correctly.

      • Rev Snow says:

         You remember incorrectly, or were told explicitly false information in the first place.

        Social Security tax is only applied up to an income cap.  This year the cap is around $110K.
        It hasn’t been that high in the past, but imagine it had been.  12.4% (include the employer’s contribution) of $110K is $13,640 each year.  It’s only been ~30 years since the new Reagan tax rates.  Check the multiplication for your self.  This imaginary, assumed too high at every step figure only comes up to $409,200.  The real max is considerably less than that.  Nowhere near your fantasy $600K paid in.

      • Rev Snow says:

        You remember incorrectly, or got told nonsense in the first place.

        SS taxes are salary capped. This year the cap is around $110K. 12.4% (include the employer contribution) of that is $13640. The Reagan tax rates have only been going for ~30 years. Multiply and you get an unrealistic max of $409K contributed. Reality is closer to $300K since the cap has been much smaller in the past. Nowhere near the fantasy $600K someone tells you they imagine they’ve contributed.

        • $15300432 says:

          Of course you have failed to take in compounding of interst or  a return from the mkt. I can assure you that I will never get back what I contributed unless I live to be 105

  28. Serf in USA says:

    You can; unless your on top of the pyramid……

  29. FederalCPA says:

    Social Security is a PONZI SCHEME, everyone would do better if it was invested on their behalf by the government or themselves. If I could opt out and put the 6% away for myself I would.

    • wombat1951 says:

      Agreed.   But it’s not 6.2% — it’s 12.4%.   Your employer has to submit the same amount in tax as well.
      :
      Think what one could do if over 12% of one’s pay were in their own control over a working lifetime.

      • The Master says:

        You think your employer would still provide that match if an opt-out was allowed? No, that would straight to profits and the stock.

        Not that I am arguing for, or against, SS. The truth is ost, if not all, employers only provide the match because it is mandated by law. It’s unlikely they would keep that if they allowed an opt-out or did away with SS.

    • Fed_Peasant says:

      What about the insurance features of SS for both you and your family?

    • grannybunny says:

      Amazing that someone claiming to be a CPA would not know what a Ponzi Scheme is.  And, there’s certainly nothing to prevent your putting 6% away for yourself; I sincerely hope you’re putting that much into TSP, or at least enough to capture the maximum matching funds.

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