trysail
Catch Me Who Can
- Joined
- Nov 8, 2005
- Posts
- 25,593
I saw this comment made elsewhere. It adds figures to an idea I've heard before. With the stock market at its current level, I doubt that its total return will be 9.8% going forward. That figure is, however, accurate (ignoring taxes and transaction costs) with respect to what the stock market returned historically (from 1926 through 2014).
In the US, Social Security takes 6.2% of your pay which is "matched" by your employer. In reality, this is 12.4% of your pay. If that were invested in a variety of stocks, the long-term rate of return with re-invested dividends would be 9.8%. This would provide over $1.5 million dollars in retirement for the $50,000 average middle class worker after 30 years.
Does it provide $1.5 M? No, because the government takes the money you pay and sends it directly to those already retired or disabled. It never earns interest, it isn't yours so it cannot be inherited. So now it is suggested we pass a law to force people to save more of their income because they aren't saving enough for retirement? I think we are saving enough, our government is just mismanaging it.
