Thursday, March 08, 2007
Social Security is Stupid
So I was listening to Dave Ramsey and he gave an illustration to a leftie about why he thinks Social Security is stupid. I'm looking at the wall in my office, and it shows the minimum wage as $5.15/hr. That is $206/week. Social security, between the employee "contribution" and the employer "contribution" (in quotes because it is not voluntary in any way) is about 15% going to the Federal Govt. That's basically $30/week. That comes to an average of $134/month.
Now let's put that $134/month into a mutual fund in a Roth IRA at 10%/year average return. Let's also assume that our employee is an incredible loser and never gets a raise. What is $134/month at 10% from age 20 to age 65? Only $1.4 MILLION. If you took 8% out to live on each year, our "loser" would be living on $112,000 per year, forever, and would have 1.4 million to leave to his heirs.
My mother in law gets Social Security and lives on, shall we say, a small fraction of $112,000.
You can get 10% in an index fund! Boring, boring.
That's why Social Security is stupid.
Now let's put that $134/month into a mutual fund in a Roth IRA at 10%/year average return. Let's also assume that our employee is an incredible loser and never gets a raise. What is $134/month at 10% from age 20 to age 65? Only $1.4 MILLION. If you took 8% out to live on each year, our "loser" would be living on $112,000 per year, forever, and would have 1.4 million to leave to his heirs.
My mother in law gets Social Security and lives on, shall we say, a small fraction of $112,000.
You can get 10% in an index fund! Boring, boring.
That's why Social Security is stupid.
# posted by Unknown @ 10:42 AM 
