Internal Rate of Returns for Retirees
1987 to 2002
Retiring @ age 62
By
William Larsen
Social Security breaks the income of workers into four groups low, mid, high and max. The low income encompasses those who make 45% of the US average wage. Mid income are those who make 100% of the average wage. High income is defined to be those who make 160% of the average wage. Max income earners are those whose income is equal or greater than the OASI tax base.
The internal rate of return can be calculated using Social Security's data on benefits paid to the four categories of workers between 1987 and 2002. The wage can be determined for each year using Social Security criteria (45%, 100%, 160% and OASI base). Applying the applicable OASI tax for each year determines what contribution they made. Using the applicable US Treasury rate for that year, the income obtained from contributions is also known.
Reference Material:
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US Average Wage since 1950 |
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Nominal Interest Rates on Special Issues |
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Monthly Interest Rates Paid To OASI, 1937-89 |
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Charts
| Category | Description | Single Worker | Worker with Non working Spouse |
| Low Income | Compares OASI's, Treasury and future workers rates of return | low | low |
| Mid Income | mid | mid | |
| High Income | high | high | |
| Max Income | max | max | |
| Low Income |
These charts show what % of current benefits would have been paid based on Treasury rates and one on future workers rates of return |
low | low |
| Mid Income | mid | mid | |
| High Income | high | high | |
| Max Income | max | max | |
| This chart shows all income categories rate of return based on what OASI Benefits in 3D | OASI IRR | OASI IRR | |
| This chart shows the balance of a theoretical account at death. | Worker | Worker & Spouse | |
| Example of an iterative result for a low income earner based on OASI's paid rate of return | OASI IRR | ||
| Example of iterative results for a low income earner based on Treasury rates paid rate of return. | Treasury IRR | ||
| Balance of your theoretical account at death based on U.S. Treasury Rates paid to OASI trust fund. A negative value means this retiree took more out of the system than they contributed with compounded interest. A positive amount is the amount they would have left their family. | Balance | ||
The following tables show the results of the Internal Rate of Return Analysis.
Terms:
Year - Year retired at age 62
Benefit - Social Security Administrations initial benefit for the worker.
Last Year's Wage - Based on Social Security's PIA and criteria for income categories.
Return - This is the internal rate of return, the average retiree would earn living 20 more years.
Balance at Retirement Based on Treasury Rate - This is the theoretical balance based on U.S. Treasury Rates, Social Security's wages and OASI tax for each year worked.
Money Left in Account - This is the balance of the account based on U.S. Treasury rates and drawing out the OASI benefit defined by Social Security.
Effective Treasury Rate - This is the effective rate of return for U.S. Treasuries for this worker's working and retired years.
% of Current Benefit to Match Effective Treasury Rate - Multiply this percent by the current benefit to find out what a private account would have provided in terms of a Social Security Benefit.
% of Current Benefit to Match 2038 IRR - Multiply this percent by the current benefit to simulate the rate of return future retirees will get after 2038.
| Table 1
Internal Rates of Return for Workers Retiring at age 62 | ||||||||
| Low Income Earner | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $3,720 | $7,795 | 10.115% | $27,558 | ($90,596) | 7.689% | 53.849% | 15.558% |
| 1988 | $3,876 | $8,292 | 9.883% | $30,524 | ($86,228) | 7.680% | 56.955% | 16.420% |
| 1989 | $4,032 | $8,700 | 9.643% | $33,948 | ($81,492) | 7.658% | 60.180% | 17.367% |
| 1990 | $4,236 | $9,045 | 9.387% | $37,633 | ($75,820) | 7.626% | 63.643% | 18.395% |
| 1991 | $4,452 | $9,463 | 9.219% | $41,523 | ($73,679) | 7.595% | 65.901% | 19.125% |
| 1992 | $4,620 | $9,815 | 9.025% | $45,473 | ($70,137) | 7.554% | 68.507% | 19.967% |
| 1993 | $4,776 | $10,321 | 8.821% | $49,346 | ($65,721) | 7.509% | 71.305% | 20.878% |
| 1994 | $5,016 | $10,410 | 8.692% | $52,952 | ($65,485) | 7.462% | 72.715% | 21.353% |
| 1995 | $5,064 | $10,689 | 8.434% | $57,037 | ($56,027) | 7.417% | 76.801% | 22.611% |
| 1996 | $5,196 | $11,118 | 8.246% | $61,282 | ($50,678) | 7.367% | 79.535% | 23.488% |
| 1997 | $5,412 | $11,661 | 8.106% | $65,609 | ($48,217) | 7.314% | 81.250% | 24.085% |
| 1998 | $5,676 | $12,342 | 8.020% | $70,246 | ($49,453) | 7.256% | 81.760% | 24.355% |
| 1999 | $6,012 | $12,988 | 7.999% | $74,539 | ($55,867) | 7.197% | 80.808% | 24.180% |
| 2000 | $6,252 | $13,711 | 7.879% | $78,925 | ($54,446) | 7.140% | 82.061% | 24.699% |
| 2001 | $6,528 | $14,470 | 7.756% | $83,237 | ($52,053) | 7.082% | 83.461% | 25.319% |
| 2002 | $6,816 | $14,976 | 7.663% | $87,783 | ($52,043) | 7.024% | 84.185% | 25.716% |
| Mid Income Earner | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $6,072 | $17,322 | 8.921% | $61,241 | ($85,511) | 7.689% | 73.313% | 17.266% |
| 1988 | $6,252 | $18,427 | 8.642% | $67,831 | ($69,580) | 7.680% | 78.466% | 18.427% |
| 1989 | $6,648 | $19,334 | 8.487% | $75,440 | ($63,742) | 7.658% | 81.110% | 19.057% |
| 1990 | $6,984 | $20,100 | 8.232% | $83,630 | ($48,891) | 7.626% | 85.781% | 20.168% |
| 1991 | $7,260 | $21,028 | 8.020% | $92,272 | ($35,925) | 7.595% | 89.804% | 21.185% |
| 1992 | $7,584 | $21,812 | 7.851% | $101,051 | ($26,541) | 7.554% | 92.740% | 21.949% |
| 1993 | $7,872 | $22,935 | 7.664% | $109,657 | ($14,587) | 7.509% | 96.136% | 22.830% |
| 1994 | $8,268 | $23,133 | 7.540% | $117,671 | ($7,783) | 7.462% | 98.033% | 23.310% |
| 1995 | $8,352 | $23,754 | 7.284% | $126,749 | $13,862 | 7.417% | 103.480% | 24.624% |
| 1996 | $8,568 | $24,706 | 7.098% | $136,182 | $29,341 | 7.367% | 107.185% | 25.534% |
| 1997 | $8,916 | $25,914 | 6.960% | $145,797 | $40,660 | 7.314% | 109.597% | 26.156% |
| 1998 | $9,360 | $27,426 | 6.884% | $156,103 | $45,510 | 7.256% | 110.179% | 26.374% |
| 1999 | $9,900 | $28,861 | 6.868% | $165,642 | $43,379 | 7.197% | 109.050% | 26.172% |
| 2000 | $10,296 | $30,470 | 6.754% | $175,389 | $53,646 | 7.140% | 110.733% | 26.687% |
| 2001 | $10,764 | $32,155 | 6.639% | $184,972 | $64,768 | 7.082% | 112.480% | 27.282% |
| 2002 | $11,232 | $33,280 | 6.549% | $195,074 | $73,343 | 7.024% | 113.525% | 27.682% |
| High Income Earner | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $7,644 | $27,715 | 8.651% | $85,028 | ($77,223) | 7.761% | 80.856% | 16.411% |
| 1988 | $7,884 | $29,482 | 8.336% | $94,668 | ($53,613) | 7.744% | 86.842% | 17.585% |
| 1989 | $8,400 | $30,934 | 8.152% | $105,840 | ($42,379) | 7.714% | 90.060% | 18.251% |
| 1990 | $8,820 | $32,159 | 7.853% | $117,918 | ($18,353) | 7.672% | 95.773% | 19.413% |
| 1991 | $9,180 | $33,645 | 7.600% | $130,835 | $3,133 | 7.629% | 100.703% | 20.456% |
| 1992 | $9,636 | $34,899 | 7.421% | $143,860 | $18,175 | 7.581% | 103.913% | 21.158% |
| 1993 | $10,020 | $36,697 | 7.207% | $156,803 | $38,438 | 7.527% | 107.999% | 22.028% |
| 1994 | $10,572 | $37,012 | 7.073% | $169,050 | $51,314 | 7.472% | 110.144% | 22.434% |
| 1995 | $10,704 | $38,006 | 6.797% | $182,682 | $83,584 | 7.421% | 116.373% | 23.666% |
| 1996 | $11,016 | $39,529 | 6.598% | $197,009 | $108,164 | 7.365% | 120.602% | 24.480% |
| 1997 | $11,496 | $41,462 | 6.446% | $211,875 | $128,504 | 7.304% | 123.525% | 25.025% |
| 1998 | $12,096 | $43,882 | 6.357% | $227,955 | $141,562 | 7.240% | 124.500% | 25.197% |
| 1999 | $12,840 | $46,178 | 6.339% | $243,055 | $145,323 | 7.176% | 123.375% | 24.930% |
| 2000 | $13,380 | $48,752 | 6.214% | $258,419 | $165,950 | 7.114% | 125.548% | 25.384% |
| 2001 | $14,028 | $51,448 | 6.088% | $273,987 | $188,313 | 7.053% | 127.844% | 25.901% |
| 2002 | $14,688 | $53,248 | 5.991% | $290,545 | $207,774 | 6.992% | 129.301% | 26.207% |
| Max Income Earner | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $7,992 | $42,000 | 8.395% | $95,831 | ($54,149) | 7.785% | 87.161% | 14.927% |
| 1988 | $8,292 | $43,800 | 8.033% | $107,867 | ($25,364) | 7.760% | 94.081% | 16.160% |
| 1989 | $8,868 | $45,000 | 7.805% | $121,759 | ($8,379) | 7.721% | 98.138% | 16.922% |
| 1990 | $9,360 | $48,000 | 7.459% | $136,967 | $22,243 | 7.670% | 104.827% | 18.135% |
| 1991 | $9,780 | $51,300 | 7.150% | $153,505 | $51,755 | 7.615% | 110.903% | 19.288% |
| 1992 | $10,320 | $53,400 | 6.929% | $170,406 | $74,270 | 7.555% | 114.929% | 20.070% |
| 1993 | $10,788 | $55,500 | 6.677% | $187,335 | $102,656 | 7.490% | 119.843% | 20.963% |
| 1994 | $11,448 | $57,600 | 6.514% | $203,739 | $123,729 | 7.424% | 122.588% | 21.416% |
| 1995 | $11,664 | $60,600 | 6.196% | $222,194 | $166,292 | 7.361% | 129.894% | 22.643% |
| 1996 | $12,072 | $61,200 | 5.968% | $241,517 | $200,883 | 7.295% | 134.916% | 23.409% |
| 1997 | $12,672 | $62,700 | 5.801% | $261,552 | $230,832 | 7.226% | 138.336% | 23.855% |
| 1998 | $13,404 | $65,400 | 5.705% | $283,211 | $253,454 | 7.154% | 139.585% | 23.928% |
| 1999 | $14,292 | $68,400 | 5.686% | $303,797 | $266,703 | 7.084% | 138.541% | 23.586% |
| 2000 | $14,976 | $72,600 | 5.554% | $325,129 | $298,989 | 7.017% | 141.125% | 23.914% |
| 2001 | $15,768 | $76,200 | 5.414% | $347,073 | $335,065 | 6.951% | 144.075% | 24.319% |
| 2002 | $16,584 | $80,400 | 5.309% | $370,620 | $368,935 | 6.887% | 146.080% | 24.537% |
| Table 2
Internal Rates of Return for Workers Retiring at age 62 with a non working spousal benefit | ||||||||
| Low Income Earner With non working Spousal Benefit | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $3,720 | $7,795 | 11.640% | $27,558 | ($188,749) | 7.689% | 35.900% | 10.372% |
| 1988 | $3,876 | $8,292 | 11.410% | $30,524 | ($186,388) | 7.680% | 37.970% | 10.946% |
| 1989 | $4,032 | $8,700 | 11.170% | $33,948 | ($183,818) | 7.658% | 40.120% | 11.578% |
| 1990 | $4,236 | $9,045 | 10.912% | $37,633 | ($180,092) | 7.626% | 42.429% | 12.263% |
| 1991 | $4,452 | $9,463 | 10.747% | $41,523 | ($181,716) | 7.595% | 43.934% | 12.750% |
| 1992 | $4,620 | $9,815 | 10.553% | $45,473 | ($181,492) | 7.554% | 45.672% | 13.311% |
| 1993 | $4,776 | $10,321 | 10.347% | $49,346 | ($180,238) | 7.509% | 47.537% | 13.919% |
| 1994 | $5,016 | $10,410 | 10.212% | $52,952 | ($185,489) | 7.462% | 48.477% | 14.235% |
| 1995 | $5,064 | $10,689 | 9.955% | $57,037 | ($176,781) | 7.417% | 51.201% | 15.074% |
| 1996 | $5,196 | $11,118 | 9.764% | $61,282 | ($174,494) | 7.367% | 53.023% | 15.658% |
| 1997 | $5,412 | $11,661 | 9.620% | $65,609 | ($176,797) | 7.314% | 54.167% | 16.057% |
| 1998 | $5,676 | $12,342 | 9.525% | $70,246 | ($185,019) | 7.256% | 54.507% | 16.236% |
| 1999 | $6,012 | $12,988 | 9.492% | $74,539 | ($201,414) | 7.197% | 53.872% | 16.120% |
| 2000 | $6,252 | $13,711 | 9.365% | $78,925 | ($206,203) | 7.140% | 54.707% | 16.466% |
| 2001 | $6,528 | $14,470 | 9.239% | $83,237 | ($209,418) | 7.082% | 55.641% | 16.879% |
| 2002 | $6,816 | $14,976 | 9.138% | $87,783 | ($216,575) | 7.024% | 56.123% | 17.144% |
| Mid Income Earner With non working Spousal Benefit | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $6,072 | $17,322 | 10.483% | $61,241 | ($245,722) | 7.689% | 48.875% | 11.510% |
| 1988 | $6,252 | $18,427 | 10.207% | $67,831 | ($231,138) | 7.680% | 52.311% | 12.285% |
| 1989 | $6,648 | $19,334 | 10.050% | $75,440 | ($232,459) | 7.658% | 54.073% | 12.705% |
| 1990 | $6,984 | $20,100 | 9.794% | $83,630 | ($220,806) | 7.626% | 57.187% | 13.445% |
| 1991 | $7,260 | $21,028 | 9.585% | $92,272 | ($212,104) | 7.595% | 59.870% | 14.123% |
| 1992 | $7,584 | $21,812 | 9.416% | $101,051 | ($209,336) | 7.554% | 61.827% | 14.632% |
| 1993 | $7,872 | $22,935 | 9.227% | $109,657 | ($203,338) | 7.509% | 64.091% | 15.220% |
| 1994 | $8,268 | $23,133 | 9.097% | $117,671 | ($205,589) | 7.462% | 65.355% | 15.540% |
| 1995 | $8,352 | $23,754 | 8.841% | $126,749 | ($185,296) | 7.417% | 68.987% | 16.416% |
| 1996 | $8,568 | $24,706 | 8.651% | $136,182 | ($174,828) | 7.367% | 71.457% | 17.022% |
| 1997 | $8,916 | $25,914 | 8.507% | $145,797 | ($171,169) | 7.314% | 73.065% | 17.437% |
| 1998 | $9,360 | $27,426 | 8.422% | $156,103 | ($178,045) | 7.256% | 73.452% | 17.582% |
| 1999 | $9,900 | $28,861 | 8.393% | $165,642 | ($196,293) | 7.197% | 72.700% | 17.448% |
| 2000 | $10,296 | $30,470 | 8.271% | $175,389 | ($196,272) | 7.140% | 73.822% | 17.791% |
| 2001 | $10,764 | $32,155 | 8.152% | $184,972 | ($194,710) | 7.082% | 74.987% | 18.188% |
| 2002 | $11,232 | $33,280 | 8.054% | $195,074 | ($197,788) | 7.024% | 75.684% | 18.455% |
| High Income Earner With non working Spousal Benefit | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $7,644 | $27,715 | 10.300% | $85,028 | ($278,912) | 7.761% | 53.904% | 10.940% |
| 1988 | $7,884 | $29,482 | 9.991% | $94,668 | ($257,344) | 7.744% | 57.895% | 11.723% |
| 1989 | $8,400 | $30,934 | 9.808% | $105,840 | ($255,559) | 7.714% | 60.040% | 12.168% |
| 1990 | $8,820 | $32,159 | 9.510% | $117,918 | ($235,463) | 7.672% | 63.849% | 12.942% |
| 1991 | $9,180 | $33,645 | 9.261% | $130,835 | ($219,638) | 7.629% | 67.136% | 13.637% |
| 1992 | $9,636 | $34,899 | 9.083% | $143,860 | ($214,079) | 7.581% | 69.275% | 14.105% |
| 1993 | $10,020 | $36,697 | 8.867% | $156,803 | ($201,816) | 7.527% | 72.000% | 14.685% |
| 1994 | $10,572 | $37,012 | 8.724% | $169,050 | ($201,613) | 7.472% | 73.429% | 14.956% |
| 1995 | $10,704 | $38,006 | 8.448% | $182,682 | ($171,659) | 7.421% | 77.582% | 15.777% |
| 1996 | $11,016 | $39,529 | 8.243% | $197,009 | ($154,338) | 7.365% | 80.402% | 16.320% |
| 1997 | $11,496 | $41,462 | 8.081% | $211,875 | ($144,621) | 7.304% | 82.350% | 16.683% |
| 1998 | $12,096 | $43,882 | 7.979% | $227,955 | ($147,340) | 7.240% | 83.000% | 16.798% |
| 1999 | $12,840 | $46,178 | 7.943% | $243,055 | ($165,525) | 7.176% | 82.250% | 16.620% |
| 2000 | $13,380 | $48,752 | 7.808% | $258,419 | ($158,826) | 7.114% | 83.699% | 16.923% |
| 2001 | $14,028 | $51,448 | 7.673% | $273,987 | ($149,847) | 7.053% | 85.229% | 17.267% |
| 2002 | $14,688 | $53,248 | 7.563% | $290,545 | ($146,782) | 6.992% | 86.200% | 17.471% |
| Max Income Earner With non working Spousal Benefit | ||||||||
| Year | Benefit | Last Year's Wage | Return | Balance at Retirement Based on Treasury Rate | Money Left in Account | Effective Treasury Rate | % of Current Benefit to Match Effective Treasury Rate | % of Current Benefit to Match 2038 IRR |
| 1987 | $7,992 | $42,000 | 10.137% | $95,831 | ($265,019) | 7.785% | 58.107% | 9.952% |
| 1988 | $8,292 | $43,800 | 9.794% | $107,867 | ($239,638) | 7.760% | 62.721% | 10.773% |
| 1989 | $8,868 | $45,000 | 9.575% | $121,759 | ($233,436) | 7.721% | 65.426% | 11.281% |
| 1990 | $9,360 | $48,000 | 9.239% | $136,967 | ($208,158) | 7.670% | 69.885% | 12.090% |
| 1991 | $9,780 | $51,300 | 8.942% | $153,505 | ($185,577) | 7.615% | 73.936% | 12.858% |
| 1992 | $10,320 | $53,400 | 8.727% | $170,406 | ($174,471) | 7.555% | 76.619% | 13.380% |
| 1993 | $10,788 | $55,500 | 8.477% | $187,335 | ($156,013) | 7.490% | 79.895% | 13.975% |
| 1994 | $11,448 | $57,600 | 8.307% | $203,739 | ($150,155) | 7.424% | 81.725% | 14.277% |
| 1995 | $11,664 | $60,600 | 7.991% | $222,194 | ($111,843) | 7.361% | 86.596% | 15.095% |
| 1996 | $12,072 | $61,200 | 7.756% | $241,517 | ($86,783) | 7.295% | 89.944% | 15.606% |
| 1997 | $12,672 | $62,700 | 7.575% | $261,552 | ($70,233) | 7.226% | 92.224% | 15.903% |
| 1998 | $13,404 | $65,400 | 7.462% | $283,211 | ($66,688) | 7.154% | 93.056% | 15.952% |
| 1999 | $14,292 | $68,400 | 7.420% | $303,797 | ($79,296) | 7.084% | 92.361% | 15.724% |
| 2000 | $14,976 | $72,600 | 7.272% | $325,129 | ($64,527) | 7.017% | 94.083% | 15.943% |
| 2001 | $15,768 | $76,200 | 7.119% | $347,073 | ($45,040) | 6.951% | 96.050% | 16.212% |
| 2002 | $16,584 | $80,400 | 6.996% | $370,620 | ($31,388) | 6.887% | 97.386% | 16.358% |
