Author Topic: Social Security Earnings Vs Net Worth  (Read 7090 times)

DollarBill

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Social Security Earnings Vs Net Worth
« on: March 09, 2014, 07:49:21 PM »
So I stumbled across this little gem and thought others might want to see their own stats. I looked up my Social Security Earnings Record at http://www.socialsecurity.gov/ then added up all my lifetime earnings. Then divided my net assets by the total Social Security Earnings.

My life time savings rate is 44% ( I feel pretty good about that number)

I would love to see hard numbers here, like the average income over your lifetime compared to net assets but it seems kind of taboo to some. So I think this can be a happy medium and it doesn't take age, and balances income with others. From the looks of it the numbers on the Social Security Website is the number in box 3 off your W2. I know the actual amount you pay in taxes can differ because of deductibles or some of your income may not be taxable (I'm Military so some of my allowances are not taxed...especially in a combat zone). I think it would be interesting to see your life time savings rate...please share.

beltim

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Re: Social Security Earnings Vs Net Worth
« Reply #1 on: March 09, 2014, 08:19:17 PM »
I love this idea but there's two main problems:
1) it doesn't account for investment gains, which are likely to make up a greater portion of your net worth the older you get;
2) there's a lot of income that's not taxable by social security - you mentioned combat pay and allowances, a lot of fellowships aren't taxed by social security, a lot of people covered by state and local pensions arent part of the social security system, there's investment gains, rental income, plus something like 18% of earned income is over the social security cap so it's not taxed.

So for me it's not a useful number, though I am interested to see others

Prairie Stash

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Re: Social Security Earnings Vs Net Worth
« Reply #2 on: March 10, 2014, 01:18:00 PM »
Over my expected life my number is 0%.

Some quick thoughts, my university degree isn't that old.  It cost roughly $50K (yay loans!), but I'll earn significantly more over my lifetime ($10-20k/year more).  Is it an asset? From my perspective it is, which really jumps up my savings rate (probably 8% of my current earnings) but I'll leave it out.  My house also appreciated $80K, seems like dumb luck to me though, again left out since I didn't "save it," it just happened.

Based on rough earnings (excluding intangibles like degree, unrealized house gains, not including investment gains), I'm guessing my saving rate is in the 30-35% range and climbing.

jfer_rose

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Re: Social Security Earnings Vs Net Worth
« Reply #3 on: March 10, 2014, 01:29:01 PM »
Interesting exercise. I don't have any special circumstances really. If I exclude my home from my net worth, I am currently at a 25% lifetime savings rate. It would be even higher if I counted my paid off student loans, but I won't do that.  I'm actually impressed! I've made major changes to my savings rate over the last year and particularly for 2014, so I look forward to this percentage increasing.

lexie2000

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Re: Social Security Earnings Vs Net Worth
« Reply #4 on: March 10, 2014, 04:34:04 PM »
Not to be a braggetypants, but I added up the value of our retirement accounts (401k, IRA, and taxable accounts).  I divided that by our combined taxed Medicare earnings (because DH has exceeded the SS max the last few years) and got 81%.  Does that mean that I'm a badass?
 

dragoncar

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Re: Social Security Earnings Vs Net Worth
« Reply #5 on: March 10, 2014, 05:18:44 PM »
It's interesting, but yeah the numbers reported are quite low (particularly if you make good use of your 401k, health plan deductions, make more than $110k, etc.) 

I do keep track of this with the actual net earnings but it's a little depressing sometimes to say "where did all the money go???"

Edit: actually the medicare earnings are legit since there is no limit.

Fun facts:

Since age 18, I've earned an average annual salary of $69k ($75k if inflation adjusted). 
My current net worth is about 50% of my total earnings.
« Last Edit: March 10, 2014, 05:34:36 PM by dragoncar »

Prairie Stash

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Re: Social Security Earnings Vs Net Worth
« Reply #6 on: March 10, 2014, 05:38:54 PM »
Not to be a braggetypants, but I added up the value of our retirement accounts (401k, IRA, and taxable accounts).  I divided that by our combined taxed Medicare earnings (because DH has exceeded the SS max the last few years) and got 81%.  Does that mean that I'm a badass?
 
I used contributions, not net assets.  For lots of people here they'll have over 100% if they use asset values. Obviously that makes no sense, saving more than you've ever made. Our numbers aren't comparable.

I'm actually happy with 30%. For my life that implies I've put aside 30% of every cheque.

lexie2000

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Re: Social Security Earnings Vs Net Worth
« Reply #7 on: March 10, 2014, 06:25:34 PM »
Not to be a braggetypants, but I added up the value of our retirement accounts (401k, IRA, and taxable accounts).  I divided that by our combined taxed Medicare earnings (because DH has exceeded the SS max the last few years) and got 81%.  Does that mean that I'm a badass?
 
I used contributions, not net assets.  For lots of people here they'll have over 100% if they use asset values. Obviously that makes no sense, saving more than you've ever made. Our numbers aren't comparable.

I'm actually happy with 30%. For my life that implies I've put aside 30% of every cheque.

I was following the OP who said that they used net assets. 

I guess we can't "play" because 401k contributions were not reported on our W-2s until 2001 and we started contributing in 1981. 

Actually, I think having more saved for retirement than you ever earned in your lifetime is pretty cool whether it be contributions or ROIs, but that's just me.
« Last Edit: March 10, 2014, 06:28:21 PM by lexie2000 »

Prairie Stash

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Re: Social Security Earnings Vs Net Worth
« Reply #8 on: March 10, 2014, 08:11:13 PM »
I understand lexie, more assets than earnings is awesome. I think OP needed a different term than savings rate. Having 84% of your wages is great, but it doesn't really compare to OP's 44%, not knowing respective ages but time is a friend to invested assets. I assume he's younger being in a combat zone, anecdotally I hear most soldiers are young.

As dragoncar pointed out you 3 are comparing current assets to net wage earnings. I used savings rate as my amount saved per year vs annual income, 2 very different numbers. I'm hoping OP sees the distinction, he posted his number as a savings rate (Lexi I know you did not use that term). He's very capable of 44% savings, I hope he does save that much.

dragoncar

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Re: Social Security Earnings Vs Net Worth
« Reply #9 on: March 10, 2014, 08:54:16 PM »
I understand lexie, more assets than earnings is awesome. I think OP needed a different term than savings rate. Having 84% of your wages is great, but it doesn't really compare to OP's 44%, not knowing respective ages but time is a friend to invested assets. I assume he's younger being in a combat zone, anecdotally I hear most soldiers are young.

As dragoncar pointed out you 3 are comparing current assets to net wage earnings. I used savings rate as my amount saved per year vs annual income, 2 very different numbers. I'm hoping OP sees the distinction, he posted his number as a savings rate (Lexi I know you did not use that term). He's very capable of 44% savings, I hope he does save that much.

Well for some of us over the past 10 years, our contributions are roughly equal to our assets :-/

DollarBill

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Re: Social Security Earnings Vs Net Worth
« Reply #10 on: March 23, 2014, 06:26:33 PM »
I know there is a bunch of variables but it's interesting. It was fun to see my past earnings. It brought back some good memories. 

arebelspy

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Re: Social Security Earnings Vs Net Worth
« Reply #11 on: April 19, 2014, 06:11:25 PM »
Not sure what's up with the multiple complainypants in this thread.

Is it a "useful" number?  No.  Pretty much nothing is (including net worth).

It's still interesting.  :)

For lots of people here they'll have over 100% if they use asset values. Obviously that makes no sense, saving more than you've ever made.

It makes sense to me, because you can own more money than you've earned (e.g. stock gains).  Essentially a number > 100% means that your unearned income throughout life is more than you've ever spent.  So then you've "saved" everything you've ever earned, plus have some extra unearned income on top of that.

I've had that exactly (getting my net worth higher than all the money I've ever earned) as a goal, actually, for awhile now (since Dragoncar started this thread on the ERE forums in late 2012: http://forum.earlyretirementextreme.com/topic.php?id=2828).

To be honest, I've never actually calculated it, it's been on my long term "to do" list since 2012 (in fact, I didn't even have to search for that thread, I had it saved in my long term goals list, and just cut and paste it), and I actually think I've probably hit it within the past year.
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arebelspy

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Re: Social Security Earnings Vs Net Worth
« Reply #12 on: April 19, 2014, 06:20:33 PM »
...lol.  I don't pay into Social Security as a teacher in NV.  Hmm.. I do have Medicare Earnings displaying.  Is your Medicare and Social Security earnings the same for those of you that pay into SS?

EDIT: Okay, I created logins for myself and my wife and added up our Medicare contributions under the assumption that will be the same, or close enough, as social security earnings would be, had we been paying into that.

Looks like our net worth passed our total earnings (earned income) in Dec 2013 (which is convenient, because the IRS website only has through 2013, obviously, but the total amount of money earned through 2013 is about 6k less than our net worth was in Dec 2013).  I fully expect to have our net worth go up by more than our earned income this year, so at this point I shouldn't ever pass back below that 100% level (heck, in FIRE it should go up up quite a bit each year, with $0 earned income, but a growing net worth).

Huzzah!  Long term goal reached (without knowing it, heh).  Actually I just learned like two days ago Dec 2013 is when my assets passed 1MM (though not total net worth yet, as I have some liabilities).  Apparently should have celebrated that month, but only found out about both those this week.
« Last Edit: April 19, 2014, 06:32:35 PM by arebelspy »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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Thomas54

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Re: Social Security Earnings Vs Net Worth
« Reply #13 on: April 19, 2014, 10:35:48 PM »
Hello All,

I'm new hear, so I'll jump right in and see how silly I can sound.

I'm almost 60, and I retired from the federal government a couple of years ago after 40 years of federal service including my 4 years of military time.  I paid 7 percent of my salary into my retirement system and that enabled me to receive approximately 76 percent of my high-three salary years, which were the last three years that I worked.  As best as I can tell, I paid approximately 160K into my retirement system over my career plus a few thousand to Social Security that I will never be eligible for since I don't have my 40 quarters nor do I intend to get them.  The value of my home, savings, cars, toys, and my wife's small 401K is about 500K and I have no debt whatsoever. 

I don't want to dig through my attic to find 40 years of tax returns, so I'll WAG it this way:

         Since:    Total Salary over 40 years X 7% per year contribution = 160K

          Then:    Total Salary over 40 years = 160K/.07
 
   Therefore:    Total Salary over 40 years = 2.28 million$

If that is correct, my net worth of 500K would be 21.9% of my career earnings.

On the surface, it doesn't seem like I've done very well over the years.  But, since I have a very nice annuity every year after 40 years of working, I'm very comfortable.

So, how does one take into account a yearly annuity when figuring net worth?

Do you use the 4% rule and project what you would have to have in an actual cash account to draw what your annuity is?

Thomas


arebelspy

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Re: Social Security Earnings Vs Net Worth
« Reply #14 on: April 20, 2014, 06:52:14 AM »
There's several ways to account for an annuity. My favorite way is an NPV of the income stream.  Search the forum for more discussion on it so we don't get this thread too far off track. :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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mr_orange

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Re: Social Security Earnings Vs Net Worth
« Reply #15 on: July 24, 2015, 07:55:41 PM »
I calculated mine today after I found a Facebook ad for the social security website.  Our net worth is 52% of our lifetime earnings; not bad. 

I made the enclosed little chart to show how things have tracked since 2005.  We graduated in '02, but I lost a lot of data I kept early on when our house was broken into and someone stole our computer. 

It is interesting to see how things tracked over time.  When we were just starting out we were at about 35% or so.  This is probably because we spent a lot of money furnishing our house and we didn't make as much.  As time wore on we made it up to around 60% before the repression.  Things picked back up after that and have gone down a bit since we had kids.  It will be interesting to see how things track as our business starts taking off this year.