Maximum OASI Tax Paid
© William Larsen
May 8, 1999
The table below represent the calculated balance of OASI tax contributions from both Employer and Employee based over the period of time specified. The rate of return used was that which was credited to the OASI Social Security fund for each year.
The column labled "LAST YEAR WORKED FOR FULL BENEFITS" is the year one turns 64. At 65 there are no more contributions.
The first balance (1) is based on all funds on deposit earning the average US Treasury rate for that year only. The Annuity (1) is based of the gradient formula.
The second balance (2) is based on the prevailing US Treasury rate for each year and those funds maturing in 30 years. At the end of 30 years, those funds are rolled over into a new 30 year bond at which time the prevailing US Treasury rate is used. Again the Annuity is based of the gradient formula listed above.
The OASI benefit paid at 62 and 65 is also provided as well as the total for spousal and worker benefit.
To go along with this analysis what percent of ones needs should come from income and what percent should come from principal? This Table lists the percent of ones needs coming from income based on planned years in retirement and how many years you have been.
In summary, there are a few cases where (1) is better than (2). This is due solely to timing and balance of note being rolled over. Both are provided so that one may evaluate the difference methods of calculating the individual balance. One could further reduce the error by looking at month by month evaluation and renewal. However, as one picks ever shorter time periods, the amount of error is little. What I am showing here is the relative size of ones contributions in relationship to ones OASI benefits. In particular a person who paid the maximum into OASI during their entire working life. One may argue they began work at 16 and paid four more years into OASI. If you want to add another $5,000 maximum to your balance. As one will see, it changes the end result little (2.2%).
If one were to go to college and graduate at 21, then one should subtract a few thousand since you were not working.
The main point to make here is, it is very clear those retiring early before 1994 broke even so to speak. Those retiring with full benefits broke even in 1991. As one can see, retiring early is the best case for payback. However, when one takes into account a non-working spousal benefit, we see that those retiring today still get back more than what was paid. This is the crux of the problem. If those who paid the maximum are getting back more than they paid in, it is very clear benefits paid to lower wage retirees are getting an even larger pay back. This pay back can be up to six times or more than what their OASI contributions would have paid.
Therefore, a fairer method would have those within the same age group share their contributions. This would mean they all take the same percentage benefit cut (~80%) or those at the top take a much larger cut while those at the bottom take a smaller cut or no cut. In any case it is unfair to make the next generation of workers pay extra taxes to make up the difference.
| YEAR | EARLY RETIREMENT | |||||||
| BEGAN WORK | LAST YEAR WORKED FOR FULL BENEFITS | BALANCE
(2) |
ANNUITY
(1) |
BALANCE
(2) |
ANNUITY
(2) |
OASI BENEFIT @ 62 | OASI WITH SPOUSAL BENEFIT | YEARS IN RETIREMENT |
| 1953 | 1998 | $222,982 | $13,900 | $283,210 | $19,449 | $11,004 | $16,506 | 24.1 |
| 1952 | 1997 | $203,843 | $12,903 | $252,193 | $17,443 | $10,648 | $15,972 | 24.0 |
| 1951 | 1996 | $187,928 | $10,603 | $224,648 | $14,002 | $10,069 | $15,103 | 23.9 |
| 1950 | 1995 | $171,209 | $10,476 | $199,391 | $13,614 | $9,602 | $14,403 | 23.8 |
| 1949 | 1994 | $154,138 | $10,051 | $175,743 | $12,895 | $9,074 | $13,611 | 23.7 |
| 1948 | 1993 | $137,640 | $7,232 | $153,997 | $9,123 | $8,539 | $12,808 | 23.6 |
| 1947 | 1992 | $122,693 | $7,410 | $134,616 | $9,199 | $8,155 | $12,233 | 23.5 |
| 1946 | 1991 | $109,020 | $6,849 | $117,298 | $8,336 | $7,700 | $11,549 | 23.4 |
| 1945 | 1990 | $96,913 | $5,853 | $101,744 | $6,949 | $7,304 | $10,956 | 23.3 |
| 1944 | 1989 | $86,208 | $6,518 | $87,865 | $7,729 | $6,937 | $10,405 | 23.2 |
| 1943 | 1988 | $74,569 | $5,642 | $75,045 | $6,737 | $6,531 | $9,796 | 23.1 |
| 1942 | 1987 | $63,272 | $5,461 | $63,430 | $6,423 | $6,022 | $9,033 | 23.0 |
| 1941 | 1986 | $54,322 | $4,192 | $54,040 | $4,975 | $5,589 | $8,383 | 22.9 |
| 1940 | 1985 | $45,892 | $4,013 | $45,936 | $4,847 | $5,106 | $7,659 | 22.8 |
| 1939 | 1984 | $38,351 | $2,409 | $38,934 | $2,892 | $4,710 | $7,065 | 22.7 |
| YEAR | FULL RETIREMENT | |||||||
| BEGAN WORK | LAST YEAR WORKED FOR FULL BENEFITS | BALANCE
(1) |
ANNUITY
(1) |
BALANCE
(2) |
ANNUITY
(2) |
OASI BENEFIT @ 65 | OASI WITH SPOUSAL BENEFIT | YEARS IN RETIREMENT |
| 1953 | 1998 | $291,767 | $20,809 | $306,667 | $21,882 | $14,700 | $22,050 | 21.1 |
| 1952 | 1997 | $269,090 | $20,989 | $275,001 | $21,461 | $14,341 | $21,512 | 21.0 |
| 1951 | 1996 | $248,008 | $16,948 | $246,498 | $16,854 | $13,691 | $20,536 | 20.9 |
| 1950 | 1995 | $227,439 | $17,079 | $220,592 | $16,570 | $12,983 | $19,475 | 20.8 |
| 1949 | 1994 | $207,420 | $15,691 | $196,317 | $14,857 | $12,313 | $18,470 | 20.7 |
| 1948 | 1993 | $190,735 | $13,169 | $174,069 | $12,023 | $11,630 | $17,446 | 20.6 |
| 1947 | 1992 | $173,510 | $13,002 | $153,807 | $11,530 | $11,472 | $17,207 | 20.5 |
| 1946 | 1991 | $156,314 | $12,503 | $135,408 | $10,836 | $11,014 | $16,521 | 20.4 |
| 1945 | 1990 | $139,684 | $9,286 | $118,835 | $7,903 | $10,586 | $15,879 | 20.3 |
| 1944 | 1989 | $124,611 | $9,389 | $104,099 | $7,847 | $9,895 | $14,842 | 20.2 |
| 1943 | 1988 | $110,815 | $8,651 | $90,995 | $7,106 | $9,000 | $13,500 | 20.1 |
| 1942 | 1987 | $98,601 | $7,439 | $79,159 | $5,974 | $8,250 | $12,374 | 20.0 |
| 1941 | 1986 | $87,802 | $8,280 | $68,538 | $6,466 | $7,621 | $11,431 | 19.9 |
| 1940 | 1985 | $76,040 | $7,329 | $59,086 | $5,698 | $7,148 | $10,721 | 19.8 |
| 1939 | 1984 | $64,612 | $6,949 | $50,811 | $5,469 | $6,595 | $9,892 | 19.7 |
