I want to try to estimate how much my social security contributions would be worth now if I had invested them myself. I have the years and the $ amounts of contributions paid to SS in excel. Is there an online estimator where I can put in the year and amount and, using actual stock market yields, it will estimate the value today? Or is there a better way to do this?
Simple… just take all of the investments you actually made during that time and add the amount that was withheld from your paycheck. Then apply all the gains and losses to the resultant amounts. 
For the times you didn’t make monthly investments don’t add the FICA amounts because you obviously felt that there was no need to save for your retirement years.
This is almost what I’m looking for
I understand what you are doing, but there is a flaw in your logic, and almost everyone makes it, and understandable because it’s an advanced finance geek topic…
From a retirement portfolio longevity / survival point of view, stock market returns are not as high quality as those from a fixed annuity, because stock market returns are so variable year-to-year, and because you can go literally a decade (or more) and be underwater in the stock market. This has happened twice in my lifetime… but no one knows about it, that’s Geezer / Boomer / Finance Geek secret knowledge.
Social Security is a (hopefully) fixed immediate (when you choose it to be immediate) annuity that you cannot outlive. So it’s not a Clark cuss word. It’s a good thing. Be grateful that you have it. And fight for it by contacting your Federal elected officials about it.
And if your health is good, do think about taking it at age 70. This would be particularly important if they raise the full retirement age (FRA) to 70 across the board.
I have been a high earner, and my SocSec is going to be $57,600 in inflation-protected Dollars for the rest of my life at 70 ($43,000 if we get the -25% trust fund disappearance haircut in 2034). I consider it to be a nice thing to have. I have a QLAC that kicks in at 82 and delivers what will probably be $40,000 in inflation-shrunken Dollars, between SocSec and the QLAC and LTC insurance I pretty much have the end of my life covered… what some CFPs call “the minimum dignity floor”. So my investments could go to $0 and I’d still have those.
I understand annuities and how they’re different because I have one from an old job, and ditto the benefits & protections of Social Security.
I did this exercise because I often hear people say they could have done better with their contributions, if only they had been able to invest it themselves. Do they just feel that way, or have they actually done the math? I wanted to see for myself. And I was hoping there was an easier way to do the math like the calculator I posted above, which doesn’t give me the option of entering a ticker symbol.
If they really want to compare SocSec versus self-investing, it’s not an easy calculation. The problem is, people apply simple 4th grade math to a highly complex problem, that’s how they get into trouble in their old age.
You need to build a spreadsheet, for me it would go year-by-year from 1976 (!) with annual stock market total returns, or maybe 60/40 portfolio if that’s how you invested in life, and take my individual year contributions (from 1976) and sum them up year by year multiplied by the annual returns and arrive at where I am today, which happens to be the threshold of retirement now in 2025 (50 years… geez). You will get some amount… a large amount.
Then you feed that lump sum into a Monte Carlo retirement simulator, and apply your policy or benchmark portfolio, and your portfolio survival probablilty… my benchmark is not the 60/40, but Harry Browne’s Permanent Portfolio (CAGR 8.5%, standard deviation 7.3%). I always plan to age 95, and a 95% chance of portfolio survival. Or if that’s too much then apply the 4% rule, though because stocks are so overvalued now, that 4% rule is probably like a 3.7% rule now for safety (Christine Benz, Morningstar).
Why Retirees May Need to Rethink the 4% Rule
Then directly compare your portfolio safe withdrawal rate against the estimated Social Security benefits.
You could take the “Earnings Taxed for Social Security” for 2024 on your Social Security statement and divide it by the number of years working to get an average earnings per year, then multiply that by 12.4% to get an average annual contribution.
Then use this calculator to compute what that annual contribution might be at various interest rates:
I stopped here because even with a lot of simplifications in the favor of Social Security, it looks to me like Social Security is such an incredible ripoff that it’s not even worth cleaning up the math.
I have my actual contributions to SS from my 1999 SS statement. I just wanted the investment calculations to be easy. I did it the tedious way and came up with a ballpark estimate.
There are a lot of simplifications in this exercise, like whether I could have invested in a tax-deferred account and if so when and how much, and if I invested in a post-tax account how much the taxes would have been & subtract that, and whether or not the annual yields I used included the fees, etc. And there are future unknowns, too. The extra work to address these things isn’t worth it to me.
Thanks for the link to the interest calculator. There are some other calculators on that website that might come in handy some day.
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I’ll be the devils advocate here. Before SS there were A LOT of people who did not prepare for retirement. In fact the concept of retirement did not exist like it does now. Most folks worked until they couldn’t. And then? Maybe lived with the kids, maybe lost their house, who knows?
I know a lot of people disagree but SS was started as a form of forced saving to give old folks (like me!) something to live on in old age. And like Clark says, SS isn’t even close to what you need for a comfortable retirement, but it’s something. I know a lot of people who bitch and moan about the FICA coming out of their pay check every month but they are doing absolutely no saving/planning for retirement at all. These are the people who would have been destitute if it wasn’t for SS. Rant over.
I’m sure there are lots of countries that do not require their citizens to pay for a retirement income plan, you may want to consider one of those.
In my travels over the last 30 years I’ve run into many US expats who have retired in places like Vietnam, Cook Islands, Mexico and Vanuatu. But they spent their working years in the US paying FICA taxes.
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Well, as your math teacher used to say, “show your work!” if you do some calculations and post them here, all of us will take a look and offer our opinions and maybe offer up some alternate models.
I plugged in the IRA maximum and S&P500 return[2] for the last 40 years and I get $2,403,699.56
with on $150,500 contributions.
I’m looking at social security statement for a similar timeframe, and it shows $356,764 and $2617 payout at 62 and $4905 at 70.
Let me know if you see any issues with the numbers, but it looks like Social Security is a massive ripoff.
Which is what you would expect when it began paying people who never contributed and now pays many who never contribute.
There are 10 different categories here besides “Retired Worker”:
I’m not necessarily saying these people shouldn’t have some sort of support. Maybe. However, not at the cost of a massive bite on my retirement.
References:
[1]Historical IRA Limit: Contribution Limit from 1974 to 2025 - DQYDJ
[2]S&P 500 Total Returns by Year Since 1926
Roger on the 2.4 million. OK… here is a flaw in your thinking, and it’s extraordinarily common, in fact it’s predominant. And it’s not your fault, but let me explain.
If you’re a Boomer or late Boomer, like me, you started to invest just as the stock market bottomed, it plunged to multi-generational valuation lows by 1982, and we’ve had this ebullient rise (mostly) since then. However… this has not always been the case. The 1966 retirement cohort had a tough time because of inflation and the multiple bear markets that finally resulted in stocks being very well-priced by 1982. But they were too old to benefit from it (retire at 65 in 1966… in 1982 you were 81). In fact, the 1966 cohort is recognized by retirement planners as even worse off than 1929 retirees, because of inflation.
Fortunately, in 1966 people had pensions. I think if we have another 1966 cohort type of experience now or in the future, it will be really really bad because of inadequate (or no) retirement savings, very few people have real pensions any longer, and possible cuts to SocSec.
What I’m saying is, actual S&P 500 returns in your sheet are too high. Put in 7% for every year. Pension managers count on 7% consistent returns in order to provide income for all of their retirees. It sounds low, but it’s risk management. If they assumed too high, they’d become insolvent and go bust in a recession.
When you’re making a general conclusion about whether SocSec is self-investing is better… it’s dangerous to cherry-pick the best years, even if you actually lived them, because “past results do not predict future returns”. You have to think like a pension manager.
How many millions do you get if you put in 7%? Then, multiple that number by 0.04 that’s an estimate of the inflation adjusted retirement income that could be expected over a variety of market conditions for a 30 year retirement. “The 4% Rule”, but it’s not a strict rule. In fact… Morningstar’s Christine Benz thinks it should be 3.7% at the current moment due to high stock valuations.
So what do you get if you take your final portfolio value times 0.037 ?
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I see. I did notice that the average return for the last 40 years was 14.1%!
With 7% return, I get $576,299.80 after 40 years. 3.7% would be $21,323.09/yr or $1,776.92/month to spend. Then when I “retire for good”, there would presumably be $576,299.80 for someone to inherit.
According to this actuary table below[1], when I’m 62, I would be expected to live 22 years.
Using an annuity payout calculator[2], I could take the $576,299.80 and withdraw $4,208.37 per month for 22 years and die with $0.
Assuming 7% returns, I have to work a little harder, but I’m still left believing SS is way worse. Am I missing something?
For example, I only invested $150,500 to get my $576,299.80. Using actual numbers, I have contributed $176,082 to Social Security and my employer $180,682 over a similar time period for the $2617 I see on my SS statement.
Poor businesses. Contributing all that money and getting $0 in return.
References:
[1]Actuarial Life Table
[2]Annuity Payout Calculator
In my opinion you’re missing two important factors:
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You are assuming that from the time you started paying FICA you would have voluntarily made the investment payments just like you were forced to do with FICA payroll withdrawals.
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Most people grossly underestimate their earning ability and as a result earn much less money over their lifetimes than they could have if they had paid more attention to the income side of the earnings-spending equation.
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You might consider that your average lifespan isn’t any good for planning if you actually end up with exceptional lifespan. My Mom is 95 and could make 100. But actuarial tables suggest “average” end of life for 65 year old at the cusp of retirement women to be what, 87? If she makes it to 100, she would have run out of money 13 years prior if she’d planned to 87.
You can’t outlive a (cuss word) annuity. That has definite value.
And I know we are making blind comparisons, but if I take SocSec at 70 I get $4798 a month. If I take it at 67 I get $3856 per month. That’s rather more than the $1,777/month to spend that you came up with. Of course, I have no idea how our salaries have compared.
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lol, ask the Houston employees that opted out of SS for their own pension. They are running to the bank all day long. It’s not complicated.
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It is complicated, for all the reason cited. Replacing defined benefit annuity-type (cuss word) Social Security for yet another 401(k) style account, even if it were mandatory, would be a disaster because of sequence of returns risk, individual investor performance chasing, and the accompanying propensity to panic sell at the bottom.
So I have live in Houston for four decades… I have never heard of these mythical “Houston investors” who opted out of SocSec. Care to elaborate? Did you see on a pop-up ad “These Houston investors did one weird trick… ?”
He maybe referring to Galveston…which is a well documented case of a county opting out of SS when that was available. Im surprised you haven’t heard of that plan since they are only an hour away from you. I am more than 1,000 miles from there and I heard about it more than 2 decades ago…
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I Googled it… you’re referring to Galveston COUNTY employees. Well, that’s not anything dramatic or new or uncommon, TIAA does that, as many teachers don’t pay SS tax but make contributions to TIAA which they can be invested in a diversified portfolio. My wife does that, she teaches at a community college. Is it good? Sure, could be, but the employee’s results are at the mercy of TIMING (and you can’t choose when you’re born and enter the workforce) and their CHOICE of portfolio, and many people aren’t so good at that. I still don’t think it substitute for a fixed Annuity type of pension. They are two different things.
I have an MBA and a Chartered Retirement Planning Counselor Certification, and I feel confident on most days about my portfolio. How on earth can we expect “every man every woman to be a financial expert”… No, just no. That model doesn’t work. I think retirees have been dealt a bad hand by society.
We’ll figure it out in the next large bear market decline, the next gully-washer. People are carrying fragile and dangerous portfolios.