Bush has proposed allowing the worker to divert 2 percentage points from their OASI tax of
10.6% to a private account. This analysis puts into table form the annuity, present value of the
annuity and the balance the fund would be based on assumptions listed at the bottom.
An analysis was done to calculate the balance of a private account based on age
and rate of return the account earned. There are several ways to do this. The
method chosen was to hold the wage constant for all age groups. By doing this,
anyone may use the table simply by dividing their current yearly wage by
$10,000 and multiplying by the table amount and determine their balance or
annuity.
Method Employed:
The age of the person was incremented starting at age 20 and increasing up to
the age of retirement for each unique birth year. Wages were increased each
year by 4.2%. Inflation does not come into play until an annuity needs to be
calculated to consume the entire balance. The equation for calculating the
annuity is a gradient formula. The rate of return or interest earned on the fund
was incremented from 5% to 12% in one percent increments.
lists the annuity by age a the privately invested OASI amount would pay.
This is the future value of the annuity. It would the the exact dollar amount paid
in the year one reached full retirement age based on social security requirements.
Each subsequent year would be increased by 3%. Payments would cease when
one turned 95.
lists the present value of the annuity in year 2000 dollars. It is the same
as listed in table 1. Because of inflation and wage growth, the annuity may
appear in table 1 to be very large when in reality, they are not.
