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Started By
Message
401K/IRA vs social security
Posted on 4/29/14 at 1:26 pm
Posted on 4/29/14 at 1:26 pm
I was having a discussion with someone about SS contributions vs 401K. I believe if I did not have to max out my SS contributions each year and put it in 401K or IRA with a annual rate of return of 5% I would have more money at retirement age of 65; starting at age 25 compared to paying into SS and receiving benefits for 25 years. Has anyone ever done the math to this to see the difference?
5
Posted on 4/29/14 at 1:33 pm to SouthLa.Tiger
If you actually contributed and didn't blow the money some where else, yes, you'd most likely destroy what you'll get out of SS.
Posted on 4/29/14 at 2:02 pm to Teddy Ruxpin
I wish there was an option to "opt out" of the FICA and SS pyramid scheme by social security number. The ability to never contribute and then never be entitled to any of its benefits would be spectacular. 
Posted on 4/29/14 at 2:07 pm to SouthLa.Tiger
SS is straight up theft. I'm 27 and fully expect to never see my money again. It is not in my retirement plan.
Posted on 4/29/14 at 2:21 pm to schexyoung
Was talking about this the other day
Why pay into a pyramid scheme that I will never see benefit from?
Why pay into a pyramid scheme that I will never see benefit from?
Posted on 4/29/14 at 2:36 pm to jimbeam
quote:
pyramid scheme
Bernie Madoff goes to jail for doing what politicians get elected to do.
Posted on 4/29/14 at 3:41 pm to SouthLa.Tiger
SS is about 6%, which is enough for me to get full match. Ignoring compound interest, thats $.25M at retirement at 57 that I probably wont get.
Terrible illustration above, just a way to show some numbers.
What I am trying to get at is if I werent required to pay SS, I could just apply thise funds to my 401k and get full match. In theory, my retirement savings should be doubled if I only contribute the minimum, since the deduction is for the same percentage. In other words, they are stealing 6% of my money as I expect none of it back, and dont expect a surprise at retirement that I have 2x as much coming to me as I expected.
Terrible illustration above, just a way to show some numbers.
What I am trying to get at is if I werent required to pay SS, I could just apply thise funds to my 401k and get full match. In theory, my retirement savings should be doubled if I only contribute the minimum, since the deduction is for the same percentage. In other words, they are stealing 6% of my money as I expect none of it back, and dont expect a surprise at retirement that I have 2x as much coming to me as I expected.
Posted on 4/29/14 at 3:46 pm to OceanMan
Ya, one of the arguments I could maybe see against this line of reasoning is that your employer pays you "more than you're worth" to cover what taxes, etc take out, so if they were eliminated, your pay may actually go down so your take home pay remains roughly the same.
Theory being they need "X" to get you to work for them and now it takes less of their money to reach "X."
However, this isn't an argument to keep SS. It would be wildly more efficient to get rid of SS IMO.
Theory being they need "X" to get you to work for them and now it takes less of their money to reach "X."
However, this isn't an argument to keep SS. It would be wildly more efficient to get rid of SS IMO.
This post was edited on 4/29/14 at 3:49 pm
Posted on 4/29/14 at 3:54 pm to OceanMan
quote:
SS is about 6%, which is enough for me to get full match. Ignoring compound interest, thats $.25M at retirement at 57 that I probably wont get.
You are forgetting the employer match on SSI, which would double the contribution, but I doubt an employer would pay you the money if not forced to pay into SS. For low earners or those with terrible 401k options/employer matches and no defined benefit pension plans SS can be a life saver later in life. I don't think it is going away, but can certainly change, + for all the young farts the FRA will probably be at least 70 unless sitting at desks all day becomes even more hazardous to your health than it currently is.
Posted on 4/29/14 at 4:09 pm to Teddy Ruxpin
quote:
Ya, one of the arguments I could maybe see against this line of reasoning is that your employer pays you "more than you're worth" to cover what taxes, etc take out, so if they were eliminated, your pay may actually go down so your take home pay remains roughly the same.
I certainly wouldn't make this argument in front of anyone I'm afraid of looking dumb in front of, as it is admittedly flawed
Point is, I wont see nearly the return on the same amount going in for both SS and 401k, regardless of match. I just wanted to throw some numbers out there for my own benefit.
Posted on 4/29/14 at 4:18 pm to OceanMan
Ya the whole idea of it irks me.
Posted on 4/29/14 at 4:41 pm to Teddy Ruxpin
Im a little irked that I can be phased out of contributing to my roth ira, but still have to pay this shite.
Posted on 4/29/14 at 4:58 pm to jimbeam
quote:
Why pay into a pyramid scheme that I will never see benefit from?
Because if you don't pay them money so the government can provide for retirement, then the government will ensure you get 5 years of retirement for every time you didn't pay them.
It's quite a grand scheme.
This post was edited on 4/29/14 at 5:00 pm
Posted on 4/29/14 at 6:49 pm to SouthLa.Tiger
You might - depends on how much money you earn. But remember, Social Security pays disabled and survivors...i.e. people who didn't contribute full amounts.
Also, Social Security is not intended to be a retirement plan. it is a social insurance plane whose purpose is to prevent elderly poverty for those who have worked all their lives. If they didn't save, at least they won't be grovelling for food stamps.
Also, Social Security is not intended to be a retirement plan. it is a social insurance plane whose purpose is to prevent elderly poverty for those who have worked all their lives. If they didn't save, at least they won't be grovelling for food stamps.
Posted on 4/29/14 at 7:12 pm to SouthLa.Tiger
Basically it is forced savings into an annuity funded by US Treasuries. Supposedly "safe" but in reality it's just another way to fund the budget.
The return would be awful if it weren't for the employer match, that at least turns it into something still not great but at least not terrible. If you are self-employed you're screwed though since you don't get the employer match.
The return would be awful if it weren't for the employer match, that at least turns it into something still not great but at least not terrible. If you are self-employed you're screwed though since you don't get the employer match.
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