If I Had Never Had to Pay into Social Security or Medicare?

Paying into Medicare and Social Security is always a hot topic. I always wonder if I had been able to invest all the money I have put into the systems over the past 20 years of my working life what it would amount to. Let's take a look at what I will have collected or earned by investing if I live until the ripe old age of 90.
If for some reason I want to wait until I was 70 before starting to collect it looks like I could pull in $3,323 a month. Collecting that for 20 years (until 90) would equal $773,520 collected over my old man life time. Keeping it simple I am not factoring taxes that I would have to pay on this income or inflation adjustments. Over the past 20 years myself and my employers have put a total of $180,047 into the Social Security and Medicare systems. Wouldn't that be nice if the companies I worked for would have just given me this money and I could invest it as I please.
For this scenario I am going to just take the latest Champions average dividend yield of 2.65% and an average price of $64 with a 10 year dividend growth rate average of 7.9%. I also threw in a low average stock price growth of 5%. Now taking the 180K now I would have 30 years until I am 70 to reinvest dividends Punching that into the handy dandy dividend reinvestment calculator let's see what we get.
Now let's take that total value with dividends reinvested and punch that in. This time I am going to collect those dividends and live off of them kinda like if I was living off of social security. Will those dividends total more than $773,520 over 20 years of retirement?
Pretty close with total dividends paid of $616,257. Is this better? Well if I could live off of the reduced income it sure is. When you pass away your social security benefits don't pass on to your kids. The big pyramid scheme just passes them on to the next retiree in the system. Having the money as my own I would be able to gift a large sum of over 2 million dollars to my kids.
There is risk in both scenarios. Social Security could be nonexistent or very limited in another 30 years. On the other end investing is always a risk. But diversifying in over 100 companies would certainly help to minimize that risk. The upside is you are in control and as long as you manage your portfolio the dividends will keep rolling in.
Have a good weekend!
Do you think Social Security will be around for our kids or will the government get it together?


  1. Hi DFG,

    The government's not figured it out in the last 30 years, so I wouldn't really expect them to figure it out in the next 30 years. Any mention of changing social security is a war on the poor and I doubt that will change.

    Your example does show the inefficiencies involved in the current social security scheme though. If I'm understanding your comparison correctly, then the $3,323 yearly pay out by social security requires additional capital from you and your employee each month from now until you retire. However with the investment approach you start with your $180K with no added capital outside of the re-invested dividends and nearly reach the same amount.

    Certainly pensions aren't sustainable with a longer living / inverse population and 401k plans are vulnerable to people not able or choosing to pay enough in. I wonder if it just isn't cheaper all around for the government or parents to put a set sum of money aside for each new child into some kind of index fund they can access when they retire and be done with it!

    Best wishes,

    1. I agree putting a chunk of change for each kids in an Index fund is probably less risky than SS.

      Take care DL

  2. I would have a lot more capital to invest if I didn't have to pay into the system. But that's how it's set up. I view it as a safety net. If financial independence doesn't workout then I have the pension, social security, and medicare to fall back on. =D

    1. Henry,
      I currently put more into SS/Medicare each paycheck than I can afford to put into my 401k. Imagine the returns if I could double my capital to invest.


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