THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, September 11, 1995 TAG: 9509080010
SECTION: FRONT PAGE: A6 EDITION: FINAL
TYPE: Another View
SOURCE: By E. ALFRED PICARDI
LENGTH: Short : 48 lines
I recently obtained the schedule of Social Security taxes paid by the employer and employee for the years 1937 through 1993. I wanted to determine what kind of pension someone might have earned if the maximum Social Security tax was paid into a tax exempt private pension fund.
I assumed someone started working in 1950 at age 21 and maximum earnings were taxed annually. I assumed both employer and employee contributions were invested, tax deferred, in a pension fund at a return of 10 percent per annum. Many investment funds over the past 30 to 40 years have compounded rates of return well in excess of 10 percent per annum.
I assumed the employee retired at age 65 in 1993 after 44 years of service. His fund would then be $403,504.22. If he withdrew $48,000 per year, i.e. $4,000 per month, leaving the balance invested at 10 percent he would draw down the fund in 20 years when he reached age 85, in the year 2013. These benefits in addition to regular retirement savings and accumulated assets should provide for an adequate retirement lifestyle including money for catastrophic-illness insurance and ordinary medical expenses for most of our people. In short, we would not need or want government aid and interference in our health and welfare. The pension system should be tax exempt.
Total benefits at age 85 would amount to $912,000. The total employee and employer contributions to the fund over the 44-year period of employment would have been $114,427.28. This pension fund would have been invested in U.S. corporations creating jobs building infrastructure and producing valuable goods and services.
It is not entirely the fault of the elderly that the Social Security system was ill-conceived and poorly managed for almost 50 years and was converted to a social-welfare program in the manner of a socialist state. It served as a means of masking the budget deficits and the national debt. It is not too late to reform the system and separate its national-welfare programs, financed by other means than a payroll tax, from legitimate private retirement funds. Taxes on tobacco, entertainment, gambling and even gasoline may be appropriate to finance the welfare programs. MEMO: Mr. Picardi is a resident of Belle Haven on the Eastern Shore.
by CNB