What would be an individuals monthly annuity if the government eliminated social security?

Question

Assume a 6% deposit by the worker and 6% by the employer.
Assume a 5% return annually
Assume paying for 40 years.
What effect has the governments use of social security had on your return?

Answer 1

"What effect has the governments use of social security had on your return?"

I should answer this question first. With the current law, up to 80% of the beneficiary social security benefit is taxable.

http://www.irs.gov/newsroom/article/0,,id=107537,00.html

And

http://www.irs.gov/pub/irs-pdf/i1040.pdf

(page 28)

By law, almost all the annuity are taxable. That would include your personal annuities and annuities from your retirement accounts (other than Roth IRA).

Thereby, the taxable income will be higher for eliminating all social security and privatize them into annuities.

"What would be an individuals monthly annuity if the government eliminated social security?"

Assume a 6% deposit by the worker and 6% by the employer.
Assume a 5% return annually
Assume paying for 40 years.

These assumptions are not enough to make the table. There are several other factors that have not been taken into the formula:

Do you want to use current mortality table publish by the IRS???

A. Contribution risk:
Do people died prior to their retirement? Do people earn differently when they increase or decrease their pay? Don't your salary goes up and down! (Hopefully just up never down!)

B. Distribution risk and expectation:
When do you expect the distribution to start? What is your expectation that the person going to live?

C. Failure risks:
What if the plan fail, ie company goes bankrupt?

I could think of many other factors.

The only thing that the information that you are giving me is the possible expectation that the person who work for 40 years will have in his/her account. That is a big IF.

Answer 2

Based on current tax law Social Security(SS) will not affect your return on the annuity. The only affect will be on the amount of SS one receives based on the annuity draw each year. It is true the government reduce your SS if you invested and planned well for retirement. Based on your information one needs to know your income to truly determine this but using Excel you can generate a formula to calculate it for you if the total amount contributed by the employee and employer is $5,000 a year, with a return of 5%, for forty years the total amount in savings/retirment fund would be $631,198.81. This is just a flat rate and not any fancy compounding.

Answer 3

Credit options online

Answer 4

what is the persons yearly salary? and is that 6% pretax or after tax...
well i really didnt want to answer your question i just wanted to say hey from another yooper :)