Before modification by Joel at 04/03/2013 04:30:37 AM
I was using a simple low wage example to illustrate the point that Social Security is a bad deal. The higher the wages a person earns the worse the deal becomes.
As you go back and try to figure out where your calculations failed... try factoring in compound interest. Yeah, retiring as a millionaire is fairly easy, with patience and foresight. Compound interest is a beautiful thing, when you are collecting it instead of paying it.
Compounding it annually gives $85,356.78; compounding it monthly gives $743,501,062,122.57 for just the FIRST months investment. However, no compounding is required to show $7X40X4X0.04=/=$48: It is $44.80, maybe not simple enough for a caveman, but simple enough to do in my head (I did check it by hand to be sure.) Feel free to explain how you arrived at either $48/month or 4% of $48/month for 50 years being $1.25 million, because I frankly cannot find any way to get there, and have tried quite a few for the second number. When I was in school they made us show our work, as I have; you are welcome and encouraged to follow suit.
Regardless, I do not know how you can suggest ANY American earning $14,500/year can afford investing a dime at any rate. Using some for insurance against old age poverty is necessary (though between the standard deduction, EIC and other credits they are likely to get that back) but investment out of the question.
I will wait for the others until tomorrow (my time) since I am getting drowsy, but do look forward to hearing the "insurers assume other peoples risk, they TOTALLY do not pay each claimant SOLELY with money from the others."