Social security benefit calculation problem,need help~?

[Express F]

-Assume Tom's base salary is $90000 per year.

-He is 28 now and plan on working until the end of his 65th year.

-The current withholding rate for Social Security is 6.2% for the employee, and the current withholding rate for the employer match for Social Security is 6.2%.

-Assume that the Social Security Administration can make an annual return of 2 percent of Tom's account.

-Assume that the stock market rate of return is 11 percent.

-Assume that the 65 the maximum payment Tom can receive from Social Security is $1800 per month.

Please answer the following:

1.What is the future value of all of Tom's contributions using the 2% rate of return? What does it look like with the 11% return?

2.Assume that Tom live until he is 80,what is the total value (constant dollars) that he will get paid out of Social Security?Compared to his contributions,is it a good investment?

3.Assume that Tom could take his lump sum investment is Social Security at age 65 (both the employee and employer contributions) and invest in Treasury bonds that yield 4.5 percent (paid quarterly).Using just the coupon rate,how much income would this generate for Tom at retirement?

4.Does it make sense to keep the current system or allow people to invest part of there own Social Security?

[Skipper]

1 Tom at 2% = $319,383.79 & Tom's employer = $319,383.79
Tom at 11% = $2,914,248.33 & Tom's employer = $2,914,248.33

These are silly assumptions. First of all, Social Security is a social program that features redistribution of wealth. It is not an investment. Low income workers and non-working spouses receive social security benefits. Tom's wife, who never worked outside of the home and thus never paid any social security tax, will receive 50% of Tom's benefits. Furthermore she will live 5 years after Tom dies and during that time she will receive 100% of Tom's benfits.

If Tom doesn't pay 6.2% of his income (plus 6.2% from his employer), Joe who worked on and off at minimum wage jobs, working only half-time from age 28 to 65 and paid in $14,089 in social security tax, will receive about $460/month from social security (25.5% of Tom's benefit) while having paid social security taxes equal to about 6.6% of Tom's contribution - redistribution of wealth.

If we allow people to invest part of their social security tax, will they be willing to pay a portion to Joe?

By the way, a 11% annualized stock market return over a 38 year period is a pipe dream.