February 04, 2005
Break-Even APY
So, after doing a bunch of fiddling with Social Security and private accounts, I have one number that's pretty reliable to repeat.
If you have a private account, it'll have to grow at over 11% annually if you want to beat inflation and make up for the budget cuts. In other words, you will have to beat the market significantly.
Assumptions are:
- Average CPI of 2.7%
- Current projected performance of private accounts: 4.6%
- Wage earner of $50,000
- 20% of all payroll tax contributions (which includes past contributions) privatized.
- Additional performance required of private accounts: around 4%
Most professional mutual fund managers and money managers do not beat the market.
Comments
I found your post on Daily Kos in a google search, it was very informative. I was wondering what is the average amount of social security received by someone who lives to 77 years old, which I belive is the life expectency for an American. How much money would you have to make in order to get back less than you pay in?
Posted by: qw3rty at February 5, 2005 07:32 PMPost a comment