Privatizing Social Security

As I watch the government trying to gain more and more control of private businesses, I began thinking of Social Security. I see how well the government has run that and wonder why people want to see us become a Socialist country.

Just for fun I decided to run some numbers to see if maybe I have been misled about the government's inability to run Social Security. Here is what I did. I took someone born in 1944. This person began working at age 18 in 1962. He only made minimum wage for his entire lifetime and retired in 2009 at the age of 65.

I went to http://www.dol.gov/ to find the minimum wage for each year. I used a 40 hour work week. I then inserted his annual earnings into the Social Security calculator found at http://www.ssa.gov/cgi-bin/benefit6.cgi to see what his benefits were. According to the Social Security calculator, at age 64 years and 8 months he would receive $846 per month. His monthly salary prior to retirement would be $1,257 so he would be getting about 67% of his pay upon retirement.

I then went to a Social Security Administration site (which is now inactive) to find the Social Security tax rates each year he worked. Those rate began at 1% and rose to 6.20% in 2009. Instead of paying the government that amount, I had him investing that into mutual funds that averaged 11.4% growth. I made a spreadsheet that showed 7 out of 10 years with growth and 3 years with losses included back-to-back years with losses each decade. At the end of 2009 he had $184,492 in his mutual fund. If this fund is averaging 11.4% growth, he could take out 7% each year and leave 4.4% to cover for inflation. $184,492 times 7% is $12,914 per year or $1,076 per month. He would be receiving 85% of his pay upon retirement. Had this man been able to invest in mutual funds instead of letting the government take his money, he would have had $230 per month more!

These figures are based on someone never making more than minimum wage throughout their lifetime. If they had made more, the numbers would have been more in favor of investing in mutual funds.

I know there may be some critics that don't think you can earn 11.4% in mutual funds. I suggest you check out my article on mutual funds which is linked below of this article.

Privatizing Social Security is something that Americans should be requesting, it is in our best interest financially.