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Last month I did my best to analyze investments to the market as an alternative to payroll taxes for Social Security. My conclusion was that the payroll taxes were worth it, though some readers respectfully disagreed.
But what if I could go back in time for a do-over. What if at age 16 I began to invest an amount into the market that was equal to and in addition to the payroll tax deducted from my pay? It wouldn’t have been hard to do. The payroll tax in 1969, my first year having a job, was only 4.2%. It gradually increased to its current rate of 6.2% in 1990. For me, that would have meant a nest egg of 2 million bucks when I retired at age 70, much more if I’d included eventual employer matches. It also would have meant more spendable income during the final 20 or so years working, as I was saving about 40% of my income in an effort to make up for lost time.
Finally, what if I could get my grandkids to do what I wish I had done!
Dan, as you know SS is not just for you, the tax paying employee. Social Security also provides benefits to never employed spouses, the disabled, and certain dependent children.
Again to clarify, I was not suggesting an alternative to Social Security.
Sorry, my bad. I need to read more closely.
LOL Robert, this is why I miss Jonathan’s edits. Several readers thought as you did, so I’d say it was my wording.
Dan, thanks for a provocative question. I think your last statement nailed it. We can’t change our past, but we can examine it, and use our experience, mistakes, and wisdom to try to make a small difference in other’s lives. Nice job.
Rick, that’s the essence of my post.
Excellent observation. You are right it wouldn’t have been difficult to do but we are lucky to live in a time when the stock market only goes up. I don’t know what the results would be if you were born 20 or 30 years earlier.
That’s a great question Nick. A quick Google search indicated the Dow to have been around 63 in 1920, 650 in 1970, 28000 in 2020, almost 40000 today. But who knows what what the next 50 years will bring.
What if you didn’t have SS and got a fatal disease in your 30s when you might have had young children? Would your widow have had enough life insurance? Just a thought. Chris
Chris, just to be clear, I’m not suggesting to eliminate SS. SS, in my opinion, is essential insurance that must be maintained and strengthened.
“What if at age 16 I began to invest an amount into the market that was equal to and in addition to the payroll tax deducted from my pay?”
Ah, shoot Dan, missed that. Thanks for clarifying. C
Glad you clarified that. In addition to FICA is good, especially if you can use a 401k and perhaps have an employer give another 50 to 100%
Actually in addition to FICA from first day on the job is essential.