I just downloaded my annual SS statement. Waiting the 15 months from today to my 70th birthday increases my monthly benefit by 17.7% (plus whatever inflation adds over the next 15 months.)
Also interesting that my annual benefit at age 70 is 86% of my lifetime FICA taxes paid.
Pretty good for someone who hasn’t paid much into the system over the past 30 years.
intercst
Does that include the taxes your employer paid?
Also let’s not forget the time value of money. Had your lifetime FICA taxes been invested in a S&P 500 index for the last 30 years, they would have increased 16 fold. ($1,000 then would be about 16,000 now). That would adjust your return to about 5% of your lifetime payments. Or 2.5% if you need to adjust for your employers’ payments.
Still, I think your point is well taken. Social Security isn’t terrible, considering it isn’t actually invested in anything.
And it is for life. No worries about hitting the century mark, and the money being gone, like with an IRA, or other sort of defined contribution vehicle.
Steve
Now that you mention it, my Fortune 500 employers over my lifetime seem to have paid in about 20% less than I did. I thought it was a dollar-for-dollar match? Have they been stiffing Social Security?
intercst
There was a period of time during and after one of the recessions that employers got a cut in their portion of social security tax. But not employees.
Cue Steve on his “can’t burden JCs” rant.
Depending on what you do with the withdrawal the money really isn’t “gone”. You may have to make RMD’s but you don’t have to spend them.
Yep, people who pay less into the system get a higher return. See social security bend points.
Absolutely! The optimal strategy for max-FICA workers is to retire just before you reach the 2nd bend point. For someone paying max-FICA from their mid-to-late 20’s, that would be age 45 or so. At age 62, you’ll be eligible for about 77% of the maximum SS benefit while paying about 1/2 the FICA taxes.
intercst
Let’s also not forget Medicare and the benefits we hope we never have to use:
Disability
Survivor
Family
Supplemental Security Income (SSI)
https://www.ssa.gov/benefits
What would it cost to get a policy with the same coverage & benefits from a private insurer?
Waiting until age 70 to collect SS effectively allows you to “buy” an inflation-adjusted life annuity for about half the price a commercial insurer would charge, depending on current interest rates.
intercst
I don’t have any idea, but how much do you imagine that the commercial insurer would skim off the top?
Prior to Obamacare, there were college student health plans that only spent 5% of premiums collected on actual medical care. The rest went for kickbacks to university administrators, sales commissions, and excessive executive compensation.
Current Gov’t programs are in the 15% to 20% skim range.
intercst
In the 1960s (?), insurance companies were given the “opportunity” to offer and sell their own plans that would be required to be “Social Security identical” programs. They quickly got out of that business when they could not even come close to offering what the govt offered to all workers and their families.
What I did by total accident — worked salaryman world hard, paying FICA, well into my mid 30’s, while growing my work in private consulting, and then did that at maniacal levels, and invested my rapidly growing income in real estate, oil&gas, high tech flyers, and broad market indexes.
d fb