Social Security Change NOW!

The politics of Social Security is predictable, so, rather than listen to the politicians, look at the numbers.

I was in banking for 14 years and learned during that time why Einstein was so impressed with compound interest. Take the following example:

You fund your IRA with $3000 when you are 18 and continue to fund it until you are 28. Thereafter, you do nothing until you are 67 (you put no more money in the account). The account achieves a return of 6.25%. You look at your balance....

On the other hand, your best friend starts funding his IRA when he is 28 at the same $3000 level. He continues to fund it with $3000 a year until he is 67. Your friend looks at his balance...

Which one has more money in his IRA account when he is 67?

You may be surprised that you both would have about $460,000 in the account.

Both of these, of course, are not adjusted for inflation, but do you see the point?

You may argue that 6.25% is a high rate. Well, considering the stock market has achieved an average of 7.5% over the last 80 years, 6.25% doesn't look so out of reach.

Besides, arguments about how much of a return you make in private returns hardly makes a difference when you compare it to the return you make on the existing SS pyramid.

To show you the retirement security you can have by investing in private accounts, if you did receive that 7.5% return you would have $765,000 in your account. Your friend would have $630,000 in his. And if you both started out when you were 18 and continued to invest $3000 a year into the account until you were 67, you both would have an astounding $1,350,000 in your account-!!

Compound Interest!

And this is just your IRA. What if you had your SS withholding doing the same thing? I don't think we would have a problem with retirement.

There are obviously particulars that need to be worked out, but if given the chance to choose between the existing system or the one I show above, I would pick the private account.