On Government Spending

I've seen a lot of news articles and opinions about federal fiscal policy, and I'm sure you have too. What most of them are full of is vague generalities about what could hypothetically happen, without a clear picture of the numbers involved in the process. Since I'm a contrarian I will not put any opinions in this post, only numbers.


Awhile back I became interested in comparing what my social security benefits would be vs the money that had gone into the social security system. Since looking into the future is impossible I decided to compare what my payments would be like today vs what the same amount of money that went into the system would have been worth had it instead been put into an index fund.


I'm making simple assumptions that shouldn't change the relationship between the two values being compared significantly, the assumptions are largely to ease up the numbers so you guys at home can see if my results are valid.


Assuming 50k salary per year
Assuming 11% annualized return for an S&P fund (this is lowballing it by .2% to make up for expense fee's).
Assuming 12.4% of your income is put into both Social Security and index funds (in reality you only pay for 6.2% your employer pays the other 6.2%, so let's pretend that your employer is also willing to pay 6.2% into an index fund). This would equate to 6200 paid to either SS or placed into an index fund every year.
Assuming my SS payments increase by 2.5% every year (the amount they currently increase, COLA adjustment)


Using the following calculator, I determined what my payments would be if I had currently turned 65 (retirement age).

http://www.calcxml.com/calculators/ret04;jsessionid=8E80220DFB10FF03369D052CDDA302E0?skn=119#results

My payments would be 19799 a year.

The index fund would now have a total value of 5,505,369

Assuming that I turned my fund entirely to cash and that I didn’t receive any interest on it, it would take SS about 84 years to pay me an amount equivalent to what the fund had amounted to. In other words, I would have to live to about 149 to breakeven (obv if we leave the fund bearing any reasonable amount of interest SS never catches up).