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...
[0] https://www.cbpp.org/research/social-security/policy-basics-...
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?
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.
I wish it had, I'd love to dedicate X% of my SS check to investing in the stock market.
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.
How much would you have had to contribute between 18-70 to achieve this number?
Ref: https://smartasset.com/retirement/the-average-salary-by-age
Am I missing something here?
Social security has less volatility and has an associated cost for that.
Social security is security: no matter how I get screwed, I'm only poor when I'm old, not poverty stricken and dead.