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Calculating the Return on Social Security Contributions

POSTED Thu, 04/22/2010 - 18:13 | POSTED BY tom

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

 

 

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A CPA (not verified) wrote on Wed, 05/05/2010 - 21:07:

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.

tom wrote on Wed, 05/05/2010 - 21:18:

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.

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