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Comment by wcunning | Hacker News Reader

Clinton ran a current account surplus, but overall debt grew because Medicare and Social Security were still losing money at the time. Not to mention that it wasn't all Clinton, some of it was the opposition Congress.

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This is a dumb unrelated question on my end but are the returns of Social Security very bad?

If you put 6.2% (12.4% total with employer contribution) of your income away into index funds that grew at 7% per year, at $100k/yr gross salary ($12.4k/yr) from ages 25 - 65 (40 years), you would end up with $2.6m (in today's dollars).

$2.6m converted into dividend funds with a 3% yield would be $6.6k/mo.

I don't know anybody getting $6.6k/mo from Social Security...

Essentially, all your numbers are subtly wrong and all of their wrongness is making the final number look much larger. You have to adjust for inflation, including 'weird' inflation. You have to account to suddenly becoming disabled after 20 years. Including the employer contribution is arguably misleading.

Social security is security: no matter how I get screwed, I'm only poor when I'm old, not poverty stricken and dead.

I think you might be right. Could you please rerun them with inflation accounted for just to make sure I didn't miss anything?

Find me 7% growth on $10k dollars for multiple decades running and you can have all my money. In other words, that's a very unreasonable mean growth rate.

https://en.wikipedia.org/wiki/S%26P_500_Index#Annual_returns

Am I missing something here?

Here’s what you’re missing. Imagine you retired in 2007. If SS was invested in private stocks you’re likely destitute and possibly dead, because your home, 401ks and social security are all underwater.

Social security has less volatility and has an associated cost for that.

$100k/year is way above what most people will ever make. The average person will peak in the $50-60k/year range. If you exclude the top percent or two as extreme outliers, it's even lower.

Ref: https://smartasset.com/retirement/the-average-salary-by-age

I think it depends on where you live. $100k / year here in New York City is not a huge amount of money.

>I don't know anybody getting $6.6k/mo from Social Security...

Of course you don't. The maximum benefit in 2019 is $3,770/mo for people who retire at 70. If you retire at 66, then the max is $2,861/mo. And these are only what you get if you maxed out 35 years of SS payments. Besides, SS is designed to only replace 40% of your pre-retirement income.

> The maximum benefit in 2019 is $3,770/mo for people who retire at 70.

How much would you have had to contribute between 18-70 to achieve this number?

They use the highest 35 years of earnings. So I would assume that you'd need to be over the inflation adjusted annual cap to max out the benefit.

Social Security funds aren't allowed to be invested in the stock market, and are held in the form of US Treasuries [0]. There was talk of changing that under Bush 44, but his reform plans never gained any serious traction.

[0] https://www.cbpp.org/research/social-security/policy-basics-...

Bush 44 wanted to turn SS into a 401K. SS is mostly invested in the federal government (ie congress spent the surplus).

> Social Security funds aren't allowed to be invested in the stock market

I know, but based on my calculations above, don't you agree that the end user (citizens) are not getting the best bang for their buck?

It depends on your definition of "best bang for your buck".

Social Security doesn't exist to maximize returns, it exists to protect the elderly from extreme poverty once they are no longer able to work. Because of that, the funds are invested in a very risk averse manner.

I'd certainly be open to the idea of a US sovereign wealth fund in some sense, but I don't think privatization or anything else where individuals are making decisions about their own Social Security account is a good idea, since we'll have to create another Social Security-like program to support the people who invested poorly and are unable to support themselves.

>There was talk of changing that under Bush 44

I wish it had, I'd love to dedicate X% of my SS check to investing in the stock market.

From what I understand, social security has more complex effects as well. It enables people to exit the workforce today, opening more senior positions, allowing for more career growth. So while the returns might not be ideal for an individual, it seems to be a case where it's good for the whole.

That isn’t true. Medicare and Social Security were still pulling surpluses during the Clinton administration (and they continued to do that until very recently).

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