The True Benefits of Social Security

Me and spreadsheets are really tight. I like doing random "what ifs" everynow and then with them just to see how things are really going. "Do I really save money buying a new fuel efficient car compared to keeping my older, paid-for car?" Those kind of questions... Well, I was doing a "what if" exercise last night about Social Security and came up with some rather interesting information.

The question: "Which pays more, Social Security or your own personal retirment account?"

The rules: You earn $9.00/hour. You work 40 hours a week with paid vacations. You're 21 years old and you'll retire when you're 68. Throughout your career, you'll never make more than 9.00/hour. Inflation is not taken into account in any of these numbers.

In scenario A, the money you and your employer would have paid into Social Security, and Medicare etc. would be paid instead into an investment account that returns five percent per year, compounded monthly. These are not unreasonable numbers, by the way. Many investment portfolios beat those numbers consistently.

In scenario B, the money is paid into Social Security as it is now.

The monthly payout:
Scenario A: $2,200.
Scenario B: $964.

The details:
Scenario A, You'll have accumulated more than 500,000 dollars. Your monthly payout is just the interest off of that money. Meaning, you'll have that money until you die.
Scenario B, you'll have accumulated nothing. The money the government gives you will be taken from two other people's monthly wages.

Where would you rather be?