Social Security Was a Good Investment for Me -- Depending on the Decade

Are Baby Boomers Busting Social Security?

Yahoo Contributor Network

Social Security won't be around like it was for previous generations. What are Americans who have yet to retire doing about? Yahoo! News asked readers to share their strategies. Here's one.

FIRST PERSON | Do I really owe FDR a thank-you for creating the Social Security Administration? The Associated Press has reported that for the first time in history, Americans retiring today will have contributed more to the Social Security system than they will receive in benefits.

I challenge that assumption. I am nearly 62 and in four years will reach full retirement age. My benefit will be $2,300 per month and assuming that I live until I age 84, I will collect nearly $500,000. That doesn't seem to be that bad a deal, or does it?

I checked out my account benefits at the Social Security website and urge everyone to look at theirs. Since I began working in 1965, I contributed $100,000 and my employer paid an equal amount. On the face of it, that's not bad, but do not ignore the time value of money. If on December 31 of each year, I had contributed the amount of FICA withheld into a mutual fund that mimics the S&P500, I would have amassed more than one million dollars. With that much money, I could buy a lifetime annuity that would pay me nearly $5,000 per month. That is quite a difference!

In the good old days of the '80s and '90s, when I was paying the maximum amount into Social Security, the ceiling was low by today's standards, and the market returns were gigantic, compared to the past decade. In fact, the first year which I worked, I paid $13 in FICA taxes and that would have grown to $1,322, if invested. The contributions that I hypothetically made in the '70s and '80s benefited from being invested for a long time, and getting good returns.

Fortunately, during my life I was also able to contribute to a 401(k) plan and worked for a company that paid a good old-fashioned pension. I thought my retirement would be secure, but like many other people, I went through a divorce and lost a net 45 percent of accumulated assets and pension. Fortunately, divorce has no effect on my Social Security benefits.

I enjoy my practice as a financial strategist and plan on working at least another 10 years, although at a slower pace. Between my retirement accounts, pension and Social Security benefits, I will be fine, and might even stay here in Connecticut.

Who knows? Maybe it is the baby-boomers who will bust the system. But I played by its rules.

View Comments (4)