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To: kabar

Of course they get more back. Because you are forgetting about the effect of compounding interest.

If those contributions had been earning even a measily 5% interest over a lifetime... the total amount contributed (including interest) would be far higher.

Here’s an example of how this works:

Lets see joe smo goes to work at 25 and works until 65 (40 years) and always earns the same amount, and always pays the same amount (to keep things simple)

If he pays $1,400 a year for 40 years = $56,000

BUT

If you factor in a 5% interest rate that he could have earned on that money (that the government is getting to keep for 40 years interest free)

Then he has paid total of $169,119


71 posted on 04/15/2015 5:11:10 AM PDT by TexasFreeper2009 (Obama lied .. the economy died.)
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To: TexasFreeper2009
Of course they get more back. Because you are forgetting about the effect of compounding interest. If those contributions had been earning even a measily 5% interest over a lifetime... the total amount contributed (including interest) would be far higher.

Medicare is not an investment program. The government is not getting compound interest on your contributions, which do not belong to you. Medicare is a pay as you go system with today's workers paying for today's retirees. It has been running in the red since 2008 with more money being paid out than received in taxes.

Getting more than three times what you paid into the system in inflation adjusted dollars is a good deal. That will not be the case for our children and grandchildren. By 2030 Medicare will only be able to pay 85% of the costs having depleted its supply of non-market US T-bills aka IOUs. Benefits will, by law, have to be cut. SS is in a similar situation.

How many people would be investing the money if there was no Medicare? In 1966 the contribution for an individual for HI was .350. For those at the lower end of the economic ladder, they are getting far more than three times their contributions.

85 posted on 04/15/2015 7:38:17 AM PDT by kabar
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