Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: KLP who wrote (423626)	4/26/2011 1:07:21 PM
From: Brian Sullivan	1 Recommendation Read Replies (1) \| Respond to of 793523

The greater question Brian...is since compound interest is truly a miracle....how much would the compound interest have been if it were left alone to compound for all those years....? For many years, we had over 10% interest rates on savings....probably the average over the 48 years was 6%....compound that amount over the years.... Ever year the SSA mails you all the data on your contributions over the years. You can plug in the interest rates (probably should use the 10 year risk free Treasury rate) and calculate the present value on that investment and see by kind of annunity that will buy. Remember that in the 1970's and earlier you only paid SS taxes on less than $20,000 on income. Thus the maximum contributions back then were very small. For example in 1978 the SS maximum wager base was $17,700 and the tax rate was 6%. which yielded a maximum contribution of $1062 which you could double (for the employer's contribution) to get $2124 Using the rule of 72 for compound interest rate doubling 6% 12 years 7% ~10 years 8% 9 years 1978 was 33 years ago, so you have 3 to 3.5 doublings yielding 17 to 25 thousand.