Use Social Security Statement to Determine Lifetime Earnings
The other day my annual dose of reality arrived in the mail - my social security statement, sent compliments of the Social Security Administration. In it I found the usual listing of annual wages dating back to my first pizza job at 16 years old. It is comforting to know that if I die my wife and kids will receive a “special one-time death benefit of $255.” Great, that ought to be just enough to pay off the singer at the funeral. Instead of doing the usual file-it-and-forget-it routine I decided to run through a little exercise I read about in Your Money or Your Life.
Not including the $1,300 per year I earned rolling out pizza dough, collecting golf balls, and assembling fast food sandwiches in college, I’ve earned $368,569 over the course of my professional working lifetime. That figure is alarmingly high when I consider how little I have to show for it. I now understand why this is such a sobering exercise. If I had managed to save just half of that figure (after taxes) I should have well over $150,000 socked away in mutual funds, stocks and cash reserves. Suffice it to say, I’m not even close.
What can I learn from this painful exercise? The reality that this much money has slipped through my fingers has me reaching for a bottle of Tums. My entire adult life I have been working and earning and working and earning, and I have basically managed to save none of it. I have this vision of someone trying to collect rain water while stranded on a deserted island. They set up an elaborate bucket system to catch runoff, only to discover after the rain has stopped their bucket has an enormous hole in the bottom. Time to get a new bucket - fortunately there are few more rain clouds left on the horizon.
Ten years from now I plan to be holding a bucket full of mutual funds, stocks, and cash. The patch for my bucket will come from a variety of sources. First, I am using this year to build my knowledge of personal finance by becoming a voracious reader on the subject. By eliminating time-wasting activities such as watching television, or playing video games, I have managed to free up more time for reading books. Second, I plan to continue writing here to express my opinions on the subject of frugal finances. The research, planning and writing I do here, as well as the interaction with my readers and other bloggers, keeps me motivated to stay on track, financially. Finally, I now have a firm grasp on my spending and no longer buy things on a whim. By walking away I have learned to say “no” to myself, something most people with financial problems have yet to learn.
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Ouch! I don’t even want to do it! If someone told me the amount of money I’ve wasted in my life just on going out to eat, I’d probably die of shock. Very chilling thought.
At least you’re turning the ship around. I look at it this way: if I had 25 years to amass a fortune, could I do it? 25 years is a long time…the amount of time I have until retirement at age 67.
this sounds like an interesting exercise - albeit a painful one for some of us. I’ll have to see if i can find that statement i got a week or two ago from Social Security Adminstration. thanks for the post!
Those Social Security statements drive me up the wall. All they make me do is realize, like you, how much I have squandered and not saved. Given my age and how much I have made over my life - my net worth should be almost three times what it is now.
This is an interesting idea - not to mention the new perspective! I’ll have to do this the next time I get my SSA statement, although I’ve noticed that as I make more money and reduce my taxable income (through 401(k) contributions and so forth) that the number on the SSA statement doesn’t really reflect my true earnings. Did you think that also?
[…] Frugal Dad: Use Social Security Statement to Determine Lifetime Earnings - This is something I’ve always thought was neat to do just because it was interesting. Frugal Dad puts a twist on it by thinking about how much he’d have if he saved/invested 50% of the amount his whole life. Ugh, my statement says over $500K and I got didly squat to show for it. […]
[…] review of the lifetime earnings statement of this class of perpetual poor would reveal lifetime spending well in excess of lifetime earnings, […]