Does Social Security compare to investments?

[Kirk W]

I was playing around with the accounting package on my computer which has all of my records back well before I began to receive social security payments. I pull up a total of all SS payments received to date and was rather shocked by the amount. I then went to my SS account online and pulled down a copy of my SS account statement that listed all of my contributions and totals for my contributions and those of my employers. If you have not set up an online account with SS, you should do so as it can be both useful and educational. What shocked me was the totals, compared. I began drawing SS at age 62 for the lessor amount and have now done so more than 15 years. What I found most interesting was that as of the next month's SS payment I will have received 3 times as much as the total of what I and my employers contributed! 

I haven't yet done any comparing of the result to the same data from my 401k, but that is next on my agenda.

[bigjim]

Of course it really helps that you lived long enough to collect that much. and or your spouse or less likely dependent children. 

 

08:10 MST Tijeras NM  everyone but me and the maint. guy seems to be on a 2 hour snow delay so I guess me (wore out old guy) and the maint. guy are running the whole show for at least the next 2 hours. Boy are we good.😀

[rickeieio]

At least you realize that half the money paid in to SS is by the employer.  Many folks don't understand that, and think SS is a good deal.  If you do a little compound interest calculation, a retirement plan blows SS out of the water.

My accountant laid out a strategy for us to minimize our SS contributions, instead focusing on debt reduction and re-investing in our business.  That netted us fairly low SS payment, but a nice rental income and nest egg in our investment portfolio.  Thank heavens our business structure allowed us that flexibility.

[bigjim]

Just keep in mind SS is as much an insurance policy as much as a retirement fund.  I wanted to do well enough to never draw my SS. Life threw me curve and I was medically retired about 2 weeks before I turned 47years old.  Thank someone for SS. BTW I had worked for pay in some fashion since I was about 12 years old.

[Barbaraok]

Whether SS or other investment types, the thing going for you is TIME.   The longer you are able to invest, the greater the return.   We've 16 years worth of pulling retirement income and all of our investments are worth more now than when we retired, in fact we have recouped (so to speak) all of the initial investments through our withdrawals and now have investments returns making more returns for us.   And if it weren't for the RMD, we would have even more still working for us.   The trick is to be able to enjoy the early years of retirement when the body is still in good enough shape to get out and about.  I use to think the downhill slide after 40 was something;  that's just a teaser to what happens after 70.   But advances in medicine (a lot due to Medicare being in place) means that we are still going, just a little more rest stops along the way. 😎

[Steven@146]

Its a very complicated thing - life. You can plan for the golden years but does it really or does it rarely turn out the way we planned? 

 

 

[Kirk W]

If you haven't looked at the SS account statement you have online, you should as there is no need to realize who paid what since the totals paid are there for you to see. Compounding it isn't so simple as one may think either since the amount of SS earnings each year so you would need to verify the SS tax rate each year and then do the math to determine each years actual SS contribution and also consider that the compounding rate changes each year, whether based on interest rates or stock market rates. You can't just take the totals paid in and somehow compound them since the payments were spread over the years worked. 

I find that the 401k & IRA money are also difficult to compute since I am unable to find any records of the annual contributions to either of them. 

It is very popular to express how much more one would have if they had invested the money paid into SS rather than sending it to the government to manage. But that ignores the question of when we would actually have begun to invest. I began to pay into Social Security at the age of 17, and the SS tax rate was 3%.  While I did get more into saving and investing, I would have to admit that other than SS we did very little long term saving or investing until we were in our 40's, but my employer did have a pretty solid retirement plan, or so it seemed. I think that I'm probably not all that unique in that it was the advent of the IRA, soon followed by the 401k that actually get me into real saving for retirement. I wonder how many workers under the age of 40 actually save for retirement beyond SS and any retirement plans of an employer that they are required to be a part of? 

Quote

IRS data show that only 12% of retirees receive at least 90% of their incomes from Social Security. ~ ~ ~ from Census Bureau document.

On the required annual withdrawals, we were at first like Barb in considering them a bad thing, but have realized that we didn't save and invest to leave a large estate and so we now spend that money each year on some sort of trip that we can enjoy together. The life expectancy varies between 74 and 79 years and do we have chosen to begin to spend that money that we worked so hard to save for our retirement. 

Edited March 22, 2022 by Kirk W

[Lou Schneider]

Don't forget about inflation.  $ 1 in 1982 is only worth 35 cents today so you'll have to triple your money to be in the same place as a similar amount back then.

https://www.aier.org/cost-of-living-calculator/

[sandsys]

4 hours ago, Steven@146 said:

Its a very complicated thing - life. You can plan for the golden years but does it really or does it rarely turn out the way we planned? 

Ours turned out better. Part of that, I think, came from investing in housing then investing proceeds from the sale of the final house. Yay for full time RVing that prompted that final sale.

Linda

[Kirk W]

2 hours ago, Lou Schneider said:

  $ 1 in 1982 is only worth 35 cents today

The calculator in your link makes it 11¢ and the following comes from InflationTool.com.

The inflation rate in the United States between 1960 and today has been 863.86%, which translates into a total increase of $863.86. This means that 100 dollars in 1960 are equivalent to 963.86 dollars in 2022. In other words, the purchasing power of $100 in 1960 equals $963.86 today. The average annual inflation rate between these periods has been 3.72%.

So if you had put $1 into a savings account to draw interest, the rates have varied to a point that I don't know how to calculate what it would be compounded to today.

On the investment front, most sources say that the stock market has had an average return of very close to 10% per year since 1929 and about the same over the last 50 years. From OfficialData.org.

If you invested $100 in the S&P 500 at the beginning of 1960, you would have about $46,783.22 at the end of 2022, assuming you reinvested all dividends. This is a return on investment of 46,683.22%, or 10.41% per year.

[rickeieio]

7 hours ago, Steven@146 said:

Its a very complicated thing - life. You can plan for the golden years but does it really or does it rarely turn out the way we planned? 

 

 

Rather than the Golden Years, I refer to it as "The Metallic Years".  Silver in your hair, gold in your teeth, and lead in your a$$.

[durangodon]

42 minutes ago, rickeieio said:

Rather than the Golden Years, I refer to it as "The Metallic Years".  Silver in your hair, gold in your teeth, and lead in your a$$.

And, if you're unfortunate enough to have certain types of cancer, platinum in your veins.

[Steven@146]

12 hours ago, rickeieio said:

Rather than the Golden Years, I refer to it as "The Metallic Years".  Silver in your hair, gold in your teeth, and lead in your a$$.

Isn't it the truth! LOLs

[Steven@146]

16 hours ago, sandsys said:

Ours turned out better. Part of that, I think, came from investing in housing then investing proceeds from the sale of the final house. Yay for full time RVing that prompted that final sale.

Linda

Linda, we did the same. We had our home in Texas, never meant to pay off the house and retire EOfLife there as the rest of the family lives up north. In the end housing went crazy in Texas and after 19 years our home investment paid off big, we more than doubled our money.

-------------

The thought of this thread and SS, the wife and I both had 401s with corporate matching contributions. We never relied on what would be our corporate pensions. It was just as well because the wife and I both lost our corporate retirement pensions and along with it any health care. The companies did away with pensions and just dumped a fraction of what would have been our pensions into a fund at Fidelity Investments. They basically said at retirement, just go away!

- We were never ones to eagle eye the stock market continually, so at close to retirement we got real conservative on investments. Anyway I never got the feeling Fidelity really had our best interest in mind,  rather what they would make managing our investments.

When we decided to retire we didn't have a lot of debit. Bought our current RV rig, sold our house, and paid off debt. We planned to enjoy what we had made, not sit around and watch the stock market. Same with the decision to take SS. We both took SS as soon as possible. Odds are we can draw SS longer and enjoy it even though its lower, then wait till the max and and not be able to enjoy it. We are in a place that we can live off our combined SS income nicely and still have our 401s / IRA nest egg plus profits from our home sale we could use. Right now we are both in good health and at our age now can get decent Medicare health care plans.  

Living the Fulltime RV life and loving every minute of it traveling the country!

 

[Barbaraok]

14 hours ago, durangodon said:

And, if you're unfortunate enough to have certain types of cancer, platinum in your veins.

CarboPlatinum for me.  But it did the trick, 28 years and still no sign of Ovarian cancer returning!

[RV_]

On 3/22/2022 at 10:00 AM, Barbaraok said:

Whether SS or other investment types, the thing going for you is TIME.   The longer you are able to invest, the greater the return.   We've 16 years worth of pulling retirement income and all of our investments are worth more now than when we retired, in fact we have recouped (so to speak) all of the initial investments through our withdrawals and now have investments returns making more returns for us.   And if it weren't for the RMD, we would have even more still working for us.   The trick is to be able to enjoy the early years of retirement when the body is still in good enough shape to get out and about.  I use to think the downhill slide after 40 was something;  that's just a teaser to what happens after 70.   But advances in medicine (a lot due to Medicare being in place) means that we are still going, just a little more rest stops along the way. 😎

Same here Barb, and I'm not 70 yet. 38 days more and I will be. I agree completely, investments and pre-2008 interest compounded made money. I'm done with banks and am much more happy with Navy FCU than USAA Bank which we no longer use. Our properties yielded great profits and our house value has nearly doubled in three years! Even my Tesla Model Y, normally a depreciating asset, is worth 10-15k more than I paid in June 2020. Crazy gains!

[Randyretired]

7 hours ago, RV_ said:

Same here Barb, and I'm not 70 yet. 38 days more and I will be. I agree completely, investments and pre-2008 interest compounded made money. I'm done with banks and am much more happy with Navy FCU than USAA Bank which we no longer use. Our properties yielded great profits and our house value has nearly doubled in three years! Even my Tesla Model Y, normally a depreciating asset, is worth 10-15k more than I paid in June 2020. Crazy gains!

Or crazy inflation!

[whj469]

Social Security does well against any investment because you are forced to contribute and despite the doomsayers it will be there when you need it with COLA increases.

[Kirk W]

22 hours ago, Randyretired said:

Or crazy inflation!

If you really look at the history of investment gains, those two are very much related. Those who borrow money consider it a bad thing when interest rates increase but to those of us who have money to loan an increase in interest rates is a good thing. With all that is happening in the world today interest rates and inflation no longer move together. If one looks to history, that same thing happened during the Civil War, WWI, & WWII. 

Quote

From the Russian Revolution to Vietnam, war has been a reliable precursor to inflation. History may be about to repeat as Russia's invasion of Ukraine tilts the balance of global political and economic forces toward higher inflation. Mar 10, 2022 WJS

Quote

Our properties yielded great profits and our house value has nearly doubled in three years! Even my Tesla Model Y, normally a depreciating asset, is worth 10-15k more than I paid in June 2020.

Our son bought his present house just 5 years ago and his current appraisal is more than 40% above what he paid for it, but how can that have been a great investment if replacing it with one that is similar will cost more than he could sell if for? To buy your home is and has always been a good hedge against inflation but it is only a way to make money if you do not buy another to replace it.

Historical CD interest rates: 1984-2022

 

Edited March 27, 2022 by Kirk W

[Randyretired]

3 hours ago, Kirk W said:

If you really look at the history of investment gains, those two are very much related. Those who borrow money consider it a bad thing when interest rates increase but to those of us who have money to loan an increase in interest rates is a good thing.

 

Gains can only be considered gains when you have something worth more than what you started with.  When the amount of dollars to buy an item goes up then what is the gain?  My house and other properties have gone up in value based on dollars but the property is still the same as it was a couple of years ago.  What has changed is clearly the value of the dollar.  Higher interest rates are only a good thing when the return is better than inflation.  Bank interest rates clearly don't even keep up with inflation as RV and others were saying and the price of every day items proves that.  With interest rates less than inflation it takes high returns just to hold on to what you have today.  Chasing those higher returns in this environment  forces higher risk or a guaranteed loss.

Edited March 27, 2022 by Randyretired

[RV_]

On 3/27/2022 at 6:14 AM, Kirk W said:

If you really look at the history of investment gains, those two are very much related. Those who borrow money consider it a bad thing when interest rates increase but to those of us who have money to loan an increase in interest rates is a good thing. With all that is happening in the world today interest rates and inflation no longer move together. If one looks to history, that same thing happened during the Civil War, WWI, & WWII. 

Our son bought his present house just 5 years ago and his current appraisal is more than 40% above what he paid for it, but how can that have been a great investment if replacing it with one that is similar will cost more than he could sell if for? To buy your home is and has always been a good hedge against inflation but it is only a way to make money if you do not buy another to replace it.

Historical CD interest rates: 1984-2022

 

Kirk why are names missing from some of your quotes? Website issue? Weird.

My comment to you is that if one has the means of moving from the higher cost areas like here, to a cheaper area, the gains can be realized. However we both agree we're never moving back to the south even for profit. Still looking elsewhere though. But only for a single story ranch with basement near a base and the same price or less as here. The particulate pollution from wildfires in this region is as bad as sucking diesel tailpipes. The cost of water with this drought here is hard to ignore too. The smoke pollution here is almost as bad as the cancer hot-spots in oil fracking and drilling areas that leak and inject chemicals in the water tables. Those aren't limited to the South, just more there and egregious IMO.

Tesla is talking stock split again today, and 30% per year gains have out paced inflation in real property. 300% gains in three years in one of my stocks more than made up for any losses and gains.

[Kirk W]

On 3/27/2022 at 10:18 AM, Randyretired said:

Gains can only be considered gains when you have something worth more than what you started with. 

Those are unrealized gains I suppose, but reality is that we really haven't made any gain from purchasing things until or unless we sell that item. Years ago an artist suggested to me that buying art as an investment was foolish because the only way to make money on it was to sell it and then you wouldn't be able to enjoy it any longer. His point was that one should buy when the value of looking at it was worth the price asked. I think that many of us tend to do that same thing with our long term investing. We make investments to save for our future, but fail to have any plan as to when the future will arrive and we will sell those investments to enjoy the profit made from them. As one approaching my eightieth birthday, I am struggling with the decision of when is it time to harvest the returns on past investments and spend them now, rather than taking my only pleasure from the savings by boasting about how much my investments have grown and how valuable my possessions are! 

[rpsinc]

2 hours ago, Kirk W said:

I am struggling with the decision of when is it time to harvest the returns on past investments and spend them now, rather than taking my only pleasure from the savings by boasting about how much my investments have grown and how valuable my possessions are! 

I am not nearing my 80th year but am considering the same issues.  I have been told multiple times that the only people who benefit from equity are the SURVIVORS.  It has caused me to re-evaluate some of my lifelong philosophies esp as it concerns being completely debt free.  In this country and with the existing tax structure, it seems to me that doing so is a formula for NOT ENJOYING the value of my possessions/investments.

I am still trying to wrap my head around that concept as my DW and I both come from cultures that strived to be debt free.  After watching the taxation implications of that direction, I realize that the only entity benefitting from our "simple" life was Uncle Sam, as we, each year, pay more in income tax and are doing less to enjoy the fruits of our sacrifices.  After a life of living one way, it is challenging to move toward living a different way, but then again learning how to do it, also takes time.

So, as I come here and enjoy personal experiences from all who choose to share, I live, somewhat vicariously, through those experiences.  Thank you all!

[mptjelgin]

7 hours ago, Kirk W said:

 As one approaching my eightieth birthday, I am struggling with the decision of when is it time to harvest the returns on past investments and spend them now, rather than taking my only pleasure from the savings by boasting about how much my investments have grown and how valuable my possessions are! 

My emphasis added to the above quote.

With all due respect, my answer would be "About 20 years ago".  If you are comfortable that you have your future expenses covered by pensions/SSI/a portion of your investments, etc. and that you indeed have "extra" money, what have you been you waiting for? 

My wife and I have travelled to Costa Rica, Ecuador, and Colombia in the past year, and have trips planned to Alaska and Peru this year, and Africa next.  COVID was a real wake-up for us when we weren't able to take trips that had been planned. Who knows what the future holds?

We are not getting any younger (and we are considerably younger than you), are you?

[Randyretired]

5 hours ago, rpsinc said:

I am not nearing my 80th year but am considering the same issues.  I have been told multiple times that the only people who benefit from equity are the SURVIVORS.  It has caused me to re-evaluate some of my lifelong philosophies esp as it concerns being completely debt free.  In this country and with the existing tax structure, it seems to me that doing so is a formula for NOT ENJOYING the value of my possessions/investments.

I am still trying to wrap my head around that concept as my DW and I both come from cultures that strived to be debt free.  After watching the taxation implications of that direction, I realize that the only entity benefitting from our "simple" life was Uncle Sam, as we, each year, pay more in income tax and are doing less to enjoy the fruits of our sacrifices.  After a life of living one way, it is challenging to move toward living a different way, but then again learning how to do it, also takes time.

So, as I come here and enjoy personal experiences from all who choose to share, I live, somewhat vicariously, through those experiences.  Thank you all!

Kirk, My comment about gains was to talk about things like 1% interest when inflation is 7.9% by reported basis and likely much higher than that.  At that point you are spending it. Just not getting anything for it. 

 As for when to spend lifes savings that is a tuff question.  However, if you have large sums not keeping up with inflation maybe sooner than later.  Then there is always that fear.  Will I need it later?  Sure wish I could figure a way to cross home plate exclaiming  WHAT A RIDE as my last check bounced.  Nice dream but not likely for me.  I am often to conservative for my own good.