http://www.suntimes.com/business/7438278-417/too-little-work-this-labor-day.html
The math is pretty rough — but acceptable to make the point. The writer reminds us that your FICA deduction is only half of the story, since the employer sets aside a like amount. Thus, the combined “contribution” is roughly 15 percent, including the Medicare Hospital tax and despite the reduction in FICA for 2011 from 6.2 percent to 4.2 percent for employees — though it remains 6.4 percent for employers. Still the writer’s complaint rings true:
“If you earned only $30,000 per year over your working life, and paid in 15 percent each year, that’s close to $220,500. If you calculate the future value of $4,500 per year (total contribution from you and your employer) earning a simple 5 percent — after 49 years of working, you’d have $892,919.98.
“If you took out only 3 percent per year, you’d receive $26,787.60 per year and it would last better than 30 years — until you’re 95 if you retire at age 65. If you bought an annuity and it paid 4 percent per year, you’d have a lifetime income of $2,976.40 per month. The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madoff ever had!
“Entitlement my ---! I paid cash for my Social Security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!”
Thank you, dear reader. You said it all very well, and I am happy to “forward” your message to many more people. And by the way, the initials FICA stand for Federal Insurance Contributions Act. So you and your employer are making a “contribution” to your retirement — in this case, not a voluntary one. Since when is a “contribution” an “entitlement”?
(Special note for math experts: The actuary pointed out that he didn’t use a declining balance for withdrawals, nor any interest crediting on the balance during the withdrawal period, and there is some “rounding” in this calculation!)
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