Obviously, I am NOT using stock market rates of return. Why on earth would I? These kinds of calculations are normally done using something more like the prime rate.
I used 5%.
But I agree, if you assume that you could have invested both your contribution and the employer’s contribution and achieved a compounded return of 12 to 14%, you get a result very different from what I describe.
The reason why you should use stock market rates of return is that even back when I started working, before the 401(k) was invented, every financial advisor I read said that long term savings should be invested in stocks. And, I read dozens of financial advisors' writings.
This was especially true for younger workers, since their money had longer to grow and compound.
Even way back then large employers had retirement plans and the money in these plans was most commonly invested in stocks.
Essentially, I see no reason at all to accept a lower rate of return than that achieved by professional money managers, especially on what should have been the largest pot of retirement money in the world. If a private employer accepted a 5% return on their pension plan they would have failed in their fiduciary responsibility to the plan participants and would have been sued. In fact, I have read about examples of this, but do not have a reference.
You can have any opinion you want, by my contention is that the funds stolen from me by Social Security should have received no lower a rate of return than the average of either the stock market, or the average of large company pension plans, both of which are in the 12% to 14% range.
This is not 20/20 hindsight or pie in the sky, but real results achieved by real pension plans.