In my original posting, I mentioned that I'd have about $2,000,000 by the time I'm 70, and would have to live until I'm 102 to get it back.
I did that by taking my actual contributions, investing them into a long-term US Treasury Bond (20 or 30-year) each year, at the average rate for that year.
But then, I simply calculated the net present value of my currently legislated benefits, using a 4% discount rate. If you are familiar with the NPV function in Excel, that's how I did it.
However, it occurred to me that I would STILL own US Treasury bonds paying high dividend rates -- up to 8%. So, what if I projected those dividend payments and bond redemptions (as they mature), subtracting my legislated benefits from them each year, and only reinvesting the remainder?
I projected that any bond reinvestment would be for 4% dividends, and that inflation would be 3% (increasing my SS benefit each year). But until the older bonds matured, they would continue to pay the dividend rate for the year those bonds were purchased.
What I found: it's worse than I thought. I would be able to fund the equivalent of my Social Security benefit solely out of dividend payments and maturing bonds until I turned 99. And, I'd still have nearly $3,000,000 remaining.
I haven't programmed a redemption strategy thereafter (which would be cashing in the lowest interest rate bonds). It wouldn't really matter, because by that time every bond would be paying my projected 4%.
But, it appears the remaining balance would last until I'm 116.
I'm going through this exercise simply to show how much your Social Security contributions would be worth, if you had simply invested them in US Treasury bonds. But, keep in mind that your situation is probably not the same as mine. I'm at the high end of the average indexed monthly wage scale, and as you get closer to the other end, the value of your benefits will be much closer to the value of your contributions.
The only pushback I would make is that not everyone can invest in government instruments like bonds. If they did, we (as taxpayers) eventually have to pay back the interest on those bonds. I'm not sure we'd be in a better place.
I think an interesting question would be, if a large number of Americans were forced into investing for their retirements (rather than rely on SS), how would the markets react to that influx of capital? The Obamas of the world like to lambaste private companies, but would people take a more pro-capitalist, free-market approach to investing? Would more people favor business over big government?