It’s February. It’s cold. To ward off the winter blahs, I dream of one day retiring to a warm beach, where I’ll stand in the browse, sipping beverages from glasses with little umbrellas in them.
I invest hours utilizing the Social Security Benefits Calculator to figure out just how much Social Security will pay me, after I’ve paid in many countless dollars throughout my working life.
And I question if my full Social Security benefits will be there when I retire, so I can pay for to get away cold, dismal winters.
It’s a reasonable question. In 1950, there were about 16 employees paying into Social Security for each person drawing advantages. Today, there are roughly 2.
According to Kiplinger, “starting in 2021 the program’s yearly expenses will exceed its income from worker and company payroll taxes and interest profits. When the program turns that corner, Social Security will begin drawing down properties in its trust funds to continue supplying complete advantages.”
If nothing is done, the trust fund will run dry by 2034 and will just have the ability to pay 76% of its guaranteed benefits.
Worse, that would also take a heavy toll on senior Americans who have a hard time to manage with Social Security as their main income.
The Biden administration has a plan to avoid cuts and increase benefits for senior Americans most in need– however wealthy Americans aren’t going to like it much.
Currently, employees pay a 6.2% Social Security payroll contribution on wages as much as $142,800; their companies pay an additional 6.2%. If you’re self-employed, like me, you pay the whole 12.4%– which we previous English majors refer to as “a lot!”
Social Security was thought about an insurance program when it was developed in 1936. Under its initial classification, payroll contributions weren’t truly “earnings taxes” at all, however “insurance coverage payments” made throughout our working lives so we can get month-to-month retirement benefits until we pass away.
But some policymakers do not see the program that method. They see it as too greatly funded by the middle class and not moneyed enough by the well-to-do.
Consider: A self-employed individual who earns $142,800 a year pays the specific very same amount of Social Security taxes–$17,707.20 — as someone who earns, say, $10 million a year.
The Biden administration intends to alter that, by keeping the cap at $142,800, however having the 12.4% payroll tax sit back in on earnings of $400,000 and up.
Because circumstance, a self-employed person earning $10 million would be taxed 12.4% on the very first $142,800, nothing on earnings beyond that up to $400,000, then an extra 12.4% on the rest of his earnings.
If my estimations are appropriate, his Social Security contributions would leap from $17,707.20 to more than $1.2 million — what we previous English majors call “a heckuva lot.”
Forbes reports the modification would affect about 800,000 buzzing-mad high earners.
I don’t understand how such a big tax change would affect markets, investing, the economy and ultimately me. Honestly, federal government math makes my head hurt.
I just intend to goodness our policymakers, as divided as the rest of the country, will find a method to team up to bring a meaningful solution to the Social Security difficulty, so that I might one day enjoy my retirement on a warm beach, drinking beverages from glasses with little umbrellas in them.
Tom Purcell, author of “Misadventures of a 1970’s Youth,” an amusing narrative offered at amazon.com, is a Pittsburgh Tribune-Review humor writer. Send out remarks to Tom at [e-mail protected]
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