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Fixing Social Security Isn't Difficult


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    I've always marveled at the debate surrounding Social Security and it's ever dwindling trust fund. Social Security is "going broke" for a simple reason - our leaders refuse to raise the maximum amount of income that can be taxed in any meaningful way.

    Social Security is funded through a payroll tax, but only for the first $137,700 of someone's income. Not just that, but since Social Security is funded through a payroll tax, some billionaires pay little to any amount into the Social Security trust fund because they tend to get their riches off of stocks and other non or minimally-taxable investments.

    So the answer to the Social Security funding "crisis", at least in my opinion, is quite simple - raise the maximum taxable amount of payroll taxes to $1,000,000 AND impose some form of tax on capital gains and dividends over $1,000,000. So the average person who invests diligently in their 401k won't get taxed twice, but the multi-billionaires who game the system will. Problem solved.

    I'm well aware this will likely never happen, but am I wrong for thinking the "crisis" in funding Social Security is one of our own making that can very easily be solved if we just had the political will to get it done?

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    That would definitely fix the problem, it seems. Sounds very logical anyways.

    I have a question about SS though. Do you get out of it what you pay in? Or do you get more, or do you get less? I have a hunch that I could do better saving/investing my earnings over a lifetime than a forced retirement account. But I wonder how the math shakes out.

    I know for many there is an incentive of having your employer pay half your benefits. And maybe in that case its worth it. Still not sure.

    But what if you are self-employed and therefore pay twice the rate that most do in SS taxes? Is paying into SS a net positive or a net negative that in case, over the course of your entire working career (40+ years)?

    My thinking is if I were allowed to opt out of SS, I could take that same % they withdraw and yield better returns in the long run for retirement. But I haven't run the numbers. Thoughts?

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    Milton Wrote: I have a question about SS though. Do you get out of it what you pay in? Or do you get more, or do you get less? I have a hunch that I could do better saving/investing my earnings over a lifetime than a forced retirement account. But I wonder how the math shakes out.

    I was actually surprised to read that for most people, you get more in benefits than what you pay in. However, self-employed individuals may be in a different boat considering they don't have an employer paying half of their SS taxes. I fall into that camp and am fine with it because I tend to look at SS as one of those "for the greater good" programs.

    Most people get back more than they put in

    Worried that the money taken out of your check to fund Social Security will never come back to you? Over the years, studies have shown that most people receive more in benefits than they paid into the program. The Urban Institute issues reports that estimate how much people are paying into the program and what they are likely to receive in retirement benefits. (The reports can be viewed at urban.org.) As a general matter, married couples are more likely to get back more than they contributed than single people, and both low-income and high-income people may receive more dollars from the program over a lifetime than the amount of money they contributed to it.

    - AARP

    True, I personally may not get as much back as I put in since I'm a private contractor, but that is true for a whole host of things in my life. I live in a state that consistently gives more to the federal government in income taxes than it gets back. I also pay into the public education system even though my wife and I won't be having any children. The list goes on and on if you really think about it.