Long story short I am tired of hearing from Gen X’ers, Y’ers, and Reps/Dems how the boomers are killing them with SSA-OASDI burdens.
So, fed up–I decided to figure out how much of a burden I am on the system.
So, I sat down to figure out how much I have put into the plan…done, including annual t-bond compounding of interest.
Now, I want to figure out how much I am going to take out, so I can figure my own burden on these unfortunate souls.
I know my current annual amount, so I have the starting payment amount.
I can find DOD from life expectancy tables, so now I have the term.
We can assume a COLA % rate and plug one in–and yes, this is a SWAG.
So now I know how much the payments are going to increase each year.
What I can’t figure out on my trusty HP-12C is how to do the series calculation.
You can’t divide the COLA by 12, because then the monthly payments would be incorrectly adjusted each month to a higher amount than actual. Besides, it is not a compound interest/savings question–it is a series of 12 payments adjusting one time annually question.
I’d really rather not do 17 annual calculations and add them up–because I am a lazy old fart.
And, yes I can do this in excel/etc., but how to do it on the beloved 12C?
I know this isn’t actually an answer to your question, but there really isn’t a connection between how much you put in to the system and how much you’re getting out. So long as you meet the employment thresholds, it doesn’t matter one whit how much you put in, because that money isn’t “yours” in any meaningful sense of the word.
It’s much like an insurance plan: the amount you pay in to insure your car doesn’t actually have a direct correlation with what you get from the insurance company if you have to file claims.
Sorry I’m not the guy who can help you with your math exercise (which may be of interest to you for non-substantive reasons), but just know that in the real world, your math problem doesn’t relate in any way to the way Social Security operates.
Really, it is easier to do an approximation assuming the COLA adjusts every month.
DO the same calculation, maybe with COLA applying for year before, year after to get upper lower bounds, then diveide result in half.
OTOH, why bother? Why calculate future COLA, it’s entirely meaningless. Nobody has a clue what it will be. Just do calculations in current dollars, Asuming investment growth, etc. are net of inflation.
Years ago there was an association in Canada that used to rail among other things, about Member of Parliament pensions. They would tell us how many millions an MP stood to collect for the pittance they donated. The trick was, they used the inflation at the time (some years, 10%) to make a cushy pension seem Midas-like. Yes, an MP would collect a few million, but that would be in a world where a cup of coffee costs $100 when he retires. Ironically the current Prime Minister was the head of that group a while ago, now building his own cushy pension.
Predicting numbers while using inflation increases simply confuses the issue, especially due to compounding when you are predicting any more than 20 years into the future. If you are going to use “how many cups of cffee does that translate to?” to do a reality check, better to ignore inflation. All number should increase the same amount.
(I.e. my payments go up 4% a year due to inflation, but if investment increases 6% a year, then just use 2% and don’t inflate payouts.)
You’d be better off assuming you only receive one payment per year. Adjust that annual amount by COLA. If you assume the same COLA every year, you’re back to a simple compounded interest question. I’d use numbers in the 2% to 4% range; maybe run multiple calculations to see how changes in COLA affect the outcome.
PS: Social Security isn’t what’s killing us. It the burden you boomers put on us via Medicare.
Right, but considering you’re paying for the service, insurance companies cannot honestly claim you are a “burden” to their budgets.
You faithfully paid the premiums year after year, and now that you’re finally eligible for a payout they call you a burden? People should rightly feel insulted by that.
Yeah, except that the burden old people put on young people really has nothing to do with money; it has to do with work. Simple mental exercise: suppose everybody wanted to retire simultaneously, so they saved and saved and saved, billions and trillions, so they could all stop working at the same time. How would that work?
The burden the old put on the young is the amount of work they do to support non-working old people. If there’s a lot of old folks, that’s a lot of work. It has nothing to do with how much taxes you paid 20 years ago. Nothing.
This is a bunch of bullshit. If you are not paying for the old people, then there is no burden on you. If the old person has paid more than he is getting out, then he is not costing you anything.
Your thought experiment doesn’t have any burden in it at all. People want those jobs the old people currently have. For your analogy to be relevant to real life, there must also instantly be people to replace these old people, as there currently are enough people to replace them. There’s actually a surplus of employable individuals, hence the unemployment rate. You are working to pay for yourself, not for the other people.
I can’t even begin to fathom how you in any way came up with the math that says that old people are harming society, even if they put more net money into it than they take out of it. I implore you to make a coherent fact based argument rather than the non-argument you made that doesn’t indicate any math literacy at all.
He didn’t say that old people are harming society; he said that they’re a burden on society. And they are: Retired people must, in some sense, be supported by those who are still working. They may well deserve that support, and one way to track what they deserve is money. But that doesn’t change the fundamental facts.
No, retired people are often (usually?) supported by those who used to work; namely, themselves.
If I save up for retirement, and then retire and live off my savings, that’s not a burden on anyone. It doesn’t matter if I saved that money in my own bank account, by investing in my house, or by giving the government a loan, repayable at age 65.
When things work like they’re supposed to (I have no idea how often that is the case, but I have a feeling it’s the majority), the only person burdened by a retiree is the retiree’s younger self.
For people who live only on their savings and a fully-funded pension plan (which IIRC excludes many civil service plans) then yes, they are a burden on no-one. Of course, that’s only until you consider health care. I strongly suspect the average well-funded retiree could not afford their own health costs nor their own long-term health insuance with no government assistance. (just try buying travel health insurance at age 85 or after a major medical event).
Technically, old people are like children in that they are at the time a net drain on society. After all, if a person with a well-funded pension or big savings died tomorrow, someone somewhere would reap the benefit of their savings - either the others on the pension fund, or their heirs for savings.
No. Pensions are paid out because there are still people working. If everyone suddenly retired and there were no more workers, there’d be no more pension payouts.
People who’ve paid into pensions do deserve their money, but it’s not magical money that was earnt in the past and held for the future - it’s money from people who are working now. Same as current pensioners supported previous pensioners back when they were working.
Canada, for example, requires pensions to be fully funded. A company providing retirement benefits must also ensure the fund is at arms-length and has enough assets to meet its obligations based on standard actuarial calculations. The only interesting variables used in those calculations are average life expectancy and interest rates (for growth and pension COLA).
As a result, they have had significantly few spectacular failures compared to the USA, where it seems unloading a failing pension plan on the government was a national sport for years and part of a standard bankruptcy strategy. (Airlines, anyone?)
Yes if everyone stopped working tomorrow, the banks would stop working and so would the stock exchange. I assume what you really mean is if the business closed doors tomorrow, could the fund meet all future obligations? Theoretically, they must be able to. In fact, many of the American bankruptcies have included situations where the company was well behind on its pension fund obligations too - or paid them is company stock, which provides a double-whammy when the business starts to falter, since its stock will too - thus ensuring pension obligations skyrocket as the business tanks.
Governments are notorious for setting up pension funds to be paid out of general revenue, contrary to the fund model - thus ensuring that today’s obligation becomes a burden for tomorrow’s taxpayers. The rules politicians impose on businesses don’t usually apply to themselves.
You are unequivocally 100% wrong about USA pension plans. Pensions are fully funded on an actual cash basis in set aside accounts. It is not a Ponzi scheme being paid out of current dollars contributed.
ERISA laws regulate this, to prevent companies from raiding pension plans for corporate use.
