Social Security Math
Below are the results of President Bush’s Social Security plan as outlined one web site www.gop.com
For a worker age of 53, their account value at age 68 would be $48,922 with a 8% compounded yield per year. Adjusted for inflation at 3% that is the equivalent of $30,980 today.
For a worker age 43 their account value at age 68 would be $150,789 with a 8% compounded yield. Adjusted for inflation at 3% that is the equivalent of $70,442 today.
For a worker age 28 their account value at age 68 would be $597,368 with a 8% compound yield. Adjusted for inflation at 3% that is the equivalent of $176,649 today.
The truth is that the Bush plan mathematically does not work unless you have about 40 years to participate and allow the compounding impact to work. A worker after 15 years with the equivalent of $31,000 after inflation amortized over the remainder of their life is about $150 dollars a month. A worker after 25 years with 70,004 could expect about $350 per month. A worker who participated 40 years with $176,649 could expect an annuity of $1,000 per month.
That means that the Bush plan mathematically only makes sense if you are between 20 and 30 years of age when you begin participating. It’s important every person to understand the results and the expected benefits. The Bush plan does not produce mathematically any significant contribution towards a workers retirement unless they can participate about 40 years in the plan.
All this still depends on finding the money, without borrowing which would add the interest costs, to replace the money diverted into the individual accounts and the money required to pay the benefits to all workers too old for the Bush plan.