Comment: I think you vastly underestimate your own abilities.

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I think you vastly underestimate your own abilities.

Firstly, you vastly overestimate how much SS pays out. If you made 40K a year while working you will get far less than 40K in benefits per year, probably much closer to 15K.

Secondly, if you have a base of capital to invest, and are living off of the returns then you do not need 1.5 million, but far less. Assuming a fairly normal and safe rate of return of 7% then you'd need a base of only 200K to match SS. Assuming a much more pessimistic, but "entirely" safe rate of 3.5% such as could be found on long dated US treasuries in todays low yield environment would mean you need about 400K. If you had say 500K your extra could be invested to account for inflation. Even in the worst case scenario then you need only about 500K to match you SS payments, not the 1.5M you indicated.

Now, the question is how much did you pay into SS over the years? Well, you and your employer both pay 6.2% or a total of 12.4% of your income over say 35 years. If you retired making 40K let's assume you averaged a salary of half that or 20K then you would pay in an average of 2200 per year to SS. If you recieved a safe average return of 6.5% while working you'd have saved your 300K.

In reality if you ever look at you SS statement you'll see a rate of return of less than 2%, which is because SS doesn't even buy something as risky as long dated treasuries but rather Treasury IOU's with an even lower rate of return, and no marketability.

So, to recap. If you made very little money, and saved what you contribute to SS by law, and get a very safe rate of return you could replace SS with no additional savings. On the other hand, if you handle your own investments, and learn something over 35 years of doing so you will surely return much more than 6.5% both during your working years, and your retirement leading to a much more comfortable retirement without relying on a government crook to cut you a check each month. Then again if you are already 65, and saved nothing but what SS required by law all your life and thus have no savings then are well and truely screwed if the g-man decides to starve you to death.

Josh Brueggen
Jack of all Trades
Precinct Commiteeman Precinct 5 Rock Island Co Illinois