On Wed, Jan 05, 2005 at 11:52:13PM -0600, Dan Minette wrote: > I've got a few facts and observations thrown in. First of all, Social > Security is set up like a mix between a safety net for senior citizens > and an old fashioned pension that is calculated as a function of one's > last 5 years of salary. There is a variable rate of yearly benefits > per dollar of yearly salary. The rate of marginal return is
> <1.2k 0% > 1.2k-7k 73% > 7k-10k 60% > 10k-55k 26% > >55k 12% > > As a result, a 55 year old making 10k/year when they (and > corresponding yearly adjusted amounts in previous and subsequent > years) would receive 6972/year when they retired at 66. But, the > difference between someone who makes 60k/year and 70k/year is only > 1224/year. Do you have a cite? Your method of calculation is quite a bit different than what is currently used. The appendix of http://cbo.gov/ftpdocs/60xx/doc6044/12-22-Diamond-Orszag.pdf gives an explanation, summarized in my own words below: AIME is calculated using total earnings for the highest 35 years of earnings (up to the taxable maximum for the year, for example, $87,900 in 2004) for which a person paid SS taxes. Earnings before age 60 are indexed to compensate for average US nominal wage growth, and earnings after age 60 are not indexed. The total is divided by 420 (number of months in 35 years) to determine AIME. PIA is the monthly benefit SS pays. It is currently calculated at age 62 and is equal to PIA = 90% ( $612 of AIME ) + 32% ( AIME between $612 and $3689 ) + 15% ( AIME over $3689 ) The earnings thresholds where the PIA percentage changes ($612 and $3689) are called "bend points". They change each year as AIME for the labor force changes. After retirement, the SS Administration adjusts each PIA every year by the CPI-W inflation index for urban wage earners. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
