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Author: zorloc Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5267  
Subject: Re: Why Social Security pisses me off Date: 7/6/2000 1:57 PM
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Here is a link which explains the relationship between W and b a little bit better.

http://www.socsec.org/facts/Basics/basics_right_4.htm

For low wage earners, b should be .8W
For average wage earners, b should be .44W
For high earners, b should .25W

If R goes to 2, T stays the same at .125, and you assume that we are all high earners, then

.25W should equal 2 * .125 * W.

The last time I looked, .125 * 2 = .25

Of course, some of the tax really goes to disability, but there are those bonds in the trust fund to tide us over a little.


Well according to:
http://www.ssa.gov/OACT/TR/TR00/lr3B5-l.html
http://www.ssa.gov/OACT/TR/TR00/lr3B5-m.html

For 2000 the spread is 23.7% for maximum wage earners to 52.8% for low wage earners.

The tax rate is 10.6% for OASI and 1.8% for DI.

R * W * T = b
2 * W * .106 = b
b = .212W

But this doesn't mean a replacement rate of 21.2% it means that SS could afford (ignoring the trust fund) an average benefit of 21.2% of the average wage (excluding everthing above the maximum tax level). So if real wage growth (wage growth less inflation) is very high then you could maintain the system, because the wages earned would be dramatically higher then benefits paid to long time retireees. But then you are screwing the retirees again...

jbw
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