Calculating the Return on Social Security Contributions

For those who actually have the stomach for it, the following are rates of return one can expect on their Social Security contributions:

  • Low Earnings Level: 2.8 percent
  • Average Earrnings Level: 1.8 percent
  • High Earnings Level: 1.2 percent
  • Maximum Taxable Earnings Level: .4 percent



Key Phrases: 

I think your rates might be high.

I calculated what I can expect, getting my projected benefit from the SS website. Assuming I work until 67, and die when I'm 76, my return will be -1.26%. This is the return that sets the NPV of my cash flows to zero. I assumed that COLA's would be 3% per year in retirement. I also carved out the "premium" relating to disability protection and survivors benefits.

This program is a crock. And it needs to be phased out.

Thanks for the feedback.

My data is pretty high-level and may be a bit dated.

Pulled it from a Wharton paper that was written a few years ago.