Social Security Calculator

Political Junkie Handbook:

Pundits have written much about President Bush's Social Security
Privatization Proposal. The Democrats' social security calculator (
http://reid.senate.gov/ss/calc.html#), for example, gives the user a
general idea of how they would fare under Bush's plan. Unfortunately,
there is lttle information about the calculator. What factors did they
consider? Benefits under the Bush plan are a function of time, return on
investment and age of retirement. None of their assumptions are listed. I
believe that they chose a very low ROI, probably around 2%, to arrive at
their conclusion that retirees will find that their benefits will be cut
under privatization.

I tested two rates of return on investment: 4.23% (average annual return
over last 10 yrs. in an international stock index fund) and 6.95% ( average
annual return over last 10 yrs in money market index funds) . I compared
returns from the perspective of current age (50, 40, 30 and 20 years of
age) and income ( $30,000, $60,000 and $90,000).

The results indicated that some people gain and others lose at a 4.23%
return and everyone enjoys substantial gains with a 6.95% return. I
estimated that everyone will break even or enjoy small and moderate gains
from the existing Social Security benefits schedule with approximately a 5%
return. This should not be too difficult to achieve since the S&P 500
annually returned over 10% in each decade during the last 70 years.

Naturally not every group experienced the same returns. Generally, the
young and affluent experienced comparatively greater returns.

Below is a chart summarizing my findings. Unfortunately, emails are a poor
way to send Excel files but a clearer, full-color version can be found at:
http://www.politicaljunkie.org/reasons.html

Age/Income/Current SS Benefits/Democrat Projections/4.23% Return/6.95%
Return
50yrs.$30,000...$12,768........$1,053.........-$226..........$825
$60,000...$20,040..........-$1,587..............$725..........$2,826
$90,000...$24,024..........-$1,935...........$2,237..........$5,389

40yrs$30,000..$13,644.........-$2,810..........-$1,605.........$1,848
$60,000...$20,772.........-$4,234............-$266..........$6,640
$90,000...$25,128.........-$5,140...........$2,457.......$12,384

30yrs$30,000..$13,956........-$4,865.........-$2,807.........$6,427
$60,000....$21,072.......-$7,333............-$921........$17,546
$90,000....$25,572.....-$8,904............$3,461.......$31,161

20yrs$30,000...$14,196.......-$7,189........-$3,046........$19,250
$60,000....$21,072.....-$10,835............-$404........$44,197
$90,000....$25,932......-$13,155..........$6,907........$73,798
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