One of the things that I am constantly asked is what is my “return” on SS. Sure, I have written several articles about gaming SS, and whether the return is positive or negative. Without fail, those articles consider average payments and are not specific. I don’t have the specifics for others (and if I did I would not share them). I do have specifics for me and I am willing to share. I share these specifics so as not to be accused of just reporting averages.
The following table shows my current and expected return from SS. It includes:
The year – from 1968 (when I turned 17) to 2041 (when I hopefully turn 90)
The salary I made each year
The individual Old Age and Survivors Insurance (OASI) tax percentage.
The inflation index (cpi-u)
The dollar value of OASI contribution, including the employer contribution and,
The current value (cpi indexed) of the total contribution.
My SS retirement benefit and finally,
IRR is the internal rate of return. The calculated IRR is the real return; that is the return above inflation
year | salary | OASI tax % | cpi-u | OASI contribution | OASI with employer | OASI current value | SS Benefit | IRR |
1968 | $580 | 3.325 | 34.1 | $19.29 | $38.57 | $288.43 | ||
1969 | $1,343 | 3.725 | 35.6 | $50.03 | $100.05 | $716.68 | ||
1970 | $1,790 | 3.65 | 37.8 | $65.34 | $130.67 | $881.50 | ||
1971 | $1,458 | 4.05 | 39.8 | $59.05 | $118.10 | $756.66 | ||
1972 | $4,003 | 4.05 | 41.1 | $162.12 | $324.24 | $2,011.73 | ||
1973 | $4,260 | 4.3 | 42.6 | $183.18 | $366.36 | $2,193.00 | ||
1974 | $4,822 | 4.375 | 46.6 | $210.96 | $421.93 | $2,308.82 | ||
1975 | $2,603 | 4.375 | 52.1 | $113.88 | $227.76 | $1,114.77 | ||
1976 | $0 | 4.375 | 55.6 | $0.00 | $0.00 | $0.00 | ||
1977 | $0 | 4.375 | 58.5 | $0.00 | $0.00 | $0.00 | ||
1978 | $0 | 4.275 | 62.5 | $0.00 | $0.00 | $0.00 | ||
1979 | $0 | 4.33 | 68.3 | $0.00 | $0.00 | $0.00 | ||
1980 | $0 | 4.52 | 77.8 | $0.00 | $0.00 | $0.00 | ||
1981 | $0 | 4.7 | 87 | $0.00 | $0.00 | $0.00 | ||
1982 | $3,125 | 4.575 | 94.3 | $142.97 | $285.94 | $773.21 | ||
1983 | $15,000 | 4.775 | 97.8 | $716.25 | $1,432.50 | $3,735.05 | ||
1984 | $15,260 | 5.2 | 101.9 | $793.52 | $1,587.04 | $3,971.49 | ||
1985 | $27,032 | 5.2 | 105.5 | $1,405.66 | $2,811.33 | $6,795.15 | ||
1986 | $40,235 | 5.2 | 109.6 | $2,092.22 | $4,184.44 | $9,735.70 | ||
1987 | $41,836 | 5.2 | 111.2 | $2,175.47 | $4,350.94 | $9,977.43 | ||
1988 | $45,000 | 5.53 | 115.7 | $2,488.50 | $4,977.00 | $10,969.19 | ||
1989 | $47,401 | 5.53 | 121.1 | $2,621.28 | $5,242.55 | $11,039.23 | ||
1990 | $51,300 | 5.6 | 127.4 | $2,872.80 | $5,745.60 | $11,500.22 | ||
1991 | $52,967 | 5.6 | 134.6 | $2,966.15 | $5,932.30 | $11,238.76 | ||
1992 | $55,500 | 5.6 | 138.1 | $3,108.00 | $6,216.00 | $11,477.77 | ||
1993 | $57,600 | 5.6 | 142.6 | $3,225.60 | $6,451.20 | $11,536.16 | ||
1994 | $58,378 | 5.26 | 146.2 | $3,070.68 | $6,141.37 | $10,711.68 | ||
1995 | $60,514 | 5.26 | 150.3 | $3,183.04 | $6,366.07 | $10,800.72 | ||
1996 | $53,836 | 5.26 | 154.4 | $2,831.77 | $5,663.55 | $9,353.66 | ||
1997 | $55,298 | 5.35 | 159.1 | $2,958.44 | $5,916.89 | $9,483.38 | ||
1998 | $51,598 | 5.35 | 161.6 | $2,760.49 | $5,520.99 | $8,711.95 | ||
1999 | $49,591 | 5.35 | 164.3 | $2,653.12 | $5,306.24 | $8,235.49 | ||
2000 | $10,499 | 5.3 | 168.8 | $556.45 | $1,112.89 | $1,681.21 | ||
2001 | 0 | 0 | 175.1 | $0.00 | 0 | 0 | ||
2002 | 0 | 0 | 177.1 | $0.00 | 0 | 0 | ||
2003 | 0 | 0 | 181.7 | $0.00 | 0 | 0 | ||
2004 | 0 | 0 | 185.2 | $0.00 | 0 | 0 | ||
2005 | 0 | 0 | 190.7 | $0.00 | 0 | 0 | ||
2006 | 0 | 0 | 198.3 | $0.00 | 0 | 0 | ||
2007 | 0 | 0 | 202.4 | $0.00 | 0 | 0 | ||
2008 | 0 | 0 | 211.1 | $0.00 | 0 | 0 | ||
2009 | 0 | 0 | 211.1 | $0.00 | 0 | 0 | ||
2010 | 0 | 0 | 216.7 | $0.00 | 0 | 0 | ||
2011 | 0 | 0 | 220.2 | $0.00 | 0 | 0 | ||
2012 | 0 | 0 | 226.7 | $0.00 | 0 | 0 | ||
2013 | 0 | 0 | 230.3 | $0.00 | 0 | 0 | ||
2014 | 0 | 0 | 233.9 | $0.00 | 0 | 0 | ||
2015 | 0 | 0 | 233.7 | $0.00 | 0 | 0 | ||
2016 | 0 | 0 | 236.9 | $0.00 | 0 | 0 | ||
2017 | 0 | 0 | 242.8 | $0.00 | 0 | 0 | ||
2018 | 0 | 0 | 247.9 | $0.00 | 0 | 0 | 8118 | |
2019 | $0 | 0 | 251.7 | $0.00 | 0 | 0 | 8118 | |
2020 | 0 | 0 | 255 | $0.00 | 0 | 0 | 26800 | |
2021 | 26800 | |||||||
2022 | 26800 | |||||||
2023 | 26800 | |||||||
2024 | 26800 | -0.43% | ||||||
2025 | 26800 | 0.09% | ||||||
2026 | 26800 | 0.53% | ||||||
2027 | 26800 | 0.90% | ||||||
2028 | 26800 | 1.21% | ||||||
2029 | 26800 | 1.49% | ||||||
2030 | 26800 | 1.73% | ||||||
2031 | 26800 | 1.95% | ||||||
2032 | 26800 | 2.14% | ||||||
2033 | 26800 | 2.31% | ||||||
2034 | 26800 | 2.47% | ||||||
2035 | 26800 | 2.60% | ||||||
2036 | 26800 | 2.73% | ||||||
2037 | 26800 | 2.85% | ||||||
2038 | 26800 | 2.95% | ||||||
2039 | 26800 | 3.05% | ||||||
2040 | 26800 | 3.14% | ||||||
2041 | 26800 | 3.22% | ||||||
26800 | 3.29% |
Caveats and Conclusions
I count as payment only contributions to the OASI. Parts of FICA also support both medicare and disability. These are separate programs and have separate benefits.
The January 2020 CPI-U is an estimate.
Payments to OASI are indexed for inflation while Payments are not. Should inflation occur in the future, the payment will also increase. The end result is that the return is calculated as a real, above inflation, return.
As is the nature of most insurance, I am currently experiencing a negative return. This will continue until 2025. My return from all funds credited to the disabilty fund is negative 100%. I funded it and received no benefit. Again, that is the nature of insurance.
I considered my spousal benefit (in 2018 and 2019). I did not consider that my wife will continue to receive an increase in her benefit after my death.
Obviously, the longer I live, the better my return. If I live to be 82 (my life expectancy when I hit age 65) my return is about 2.3% above inflation.
My total contribution to OASI is 43K. Another 43K was contributed by the employer. The total contribution indexed for inflation is 172K. Obviously I have already gotten back my contribution.
Could I have done better with a market savings account? Maybe. I could also have done worse. The SSA guarantees that there are no big winners or losers. It is, after all, insurance.