Sunday, November 18, 2007

THINKING ABOUT SOCIAL SECURITY

For those who think Social Security is a “really good deal,” here’s a factual tidbit.

My wife and I will begin drawing our social security income in January 2008, retiring at the ages of 62 and 63 respectively. My wife has had FICA taxes withheld continuously only since 2000, and intermittently before 2000. I’ve had FICA taxes withheld continuously since 1972.

If we had each been able to invest just our employee contribution in the Dow Jones industrials each year we had taxes withheld, we would be able to purchase annuities today that would pay only 5% less (wife) and 47% more (me) than we will receive in monthly benefits from the Social Security administration. Since social security payments are strongly biased in favor of minimum-wage or short-time contributors, (partial) privatization looks pretty attractive to me.