Archive for the ‘Finance’ Category
How To Determine If Your Social Security Retirement Benefits Are Taxed
Robert D. Cavanaugh, CLU asked:
Up to 85% of your Social Security retirement benefits may be taxable. Here’s how to find out how much is taxable and what you can do to reduce or eliminate any tax.
Of all the financial issues surrounding being a senior, the one that tops the list in terms of anger is the fact that, depending on the situation, Social Security retirement benefits are taxable. My experience indicates that some seniors are completely unaware of this fact. I have also had to sit and listen to the ranting of those who are aware. It goes something like this: “I already paid tax on the earnings during my working years. The Social Security withdrawn from my income each pay check was a tax. This sounds like a tax on a tax.” And on and on…
After letting the person blow off some steam, my response typically was, “Hey, don’t shoot the messenger! I’m here to see if any of your Social Security benefits are taxed, if so, how much and what we can do to reduce or eliminate that tax.” So let me take you through the first part of our conversation.
Whether or not you are taxed depends on:
1. The amount of your income.
2. Whether or not you have income from sources other than Social Security.
The amount of your tax depends on:
1. Your marital filing status: single or married.
2. The amount of your income.
The tax on Social Security retirement benefits was put into effect in 1983. Tax was applied on up to 50% of benefits. In 1993 this was increased to 85%. Here’s how the calculation goes…
The first step is to calculate your “provisional income”. So grab last year’s tax return.
1. Subtract your taxable S.S. benefits (line 20b) from your Adjust Gross Income (line 37).
2. Add one half of your total S.S. benefits (line 20a).
3. Add any tax exempt interest (line 8b).
4. The result is your “provisional income”.
Once you know this number, you can apply the rules to determine how much of your S.S. is taxed. Again, this depends on whether you are married or single and the amount of your income.
Let’s look first at a married couple filing jointly. Here is the math…
1. If your provisional income is below $32,000, you don’t have a problem.
2. For provisional income over $32,000:
a. Take the provisional income between $32,000 and $44,000 and divide it by two.
b. If your provisional income is above $44,000, take the total provisional income, subtract $44,000 and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefits (line 20a) by 0.85.
e. The lesser of your result on 2c and 2e above is the amount of your S.S. benefit taxed.
Now let’s look at the calculation for a single person…
1. If your provisional income is below $25,000, none of your S.S. benefits are taxable.
2. For provisional incomes over $25,000:
a. Take the provisional income between $34,000 and $25,000 and divide it by two.
b. If your provisional income is above $34,000, subtract $34,000 from your total provisional income and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefit (line 20) by 0.85.
e. The lesser of your result on 2c and 2d above is the amount of your S.S. benefit taxed.
Now that you know whether or not any of your Social Security benefits are taxable, and if so, how much, the next step is to take a look at the ways you can reduce or eliminate this tax. In general, there are three solution categories:
1. Reduce your interest income. The most common is interest on CDs.
2. Reduce your dividend income.
3. Reduce your tax exempt interest income.
Note: The calculations above use a very simplified approach. Your situation may have other factors that would affect the math. It is strongly advised that you consult with a qualified tax professional.
Leo
Up to 85% of your Social Security retirement benefits may be taxable. Here’s how to find out how much is taxable and what you can do to reduce or eliminate any tax.
Of all the financial issues surrounding being a senior, the one that tops the list in terms of anger is the fact that, depending on the situation, Social Security retirement benefits are taxable. My experience indicates that some seniors are completely unaware of this fact. I have also had to sit and listen to the ranting of those who are aware. It goes something like this: “I already paid tax on the earnings during my working years. The Social Security withdrawn from my income each pay check was a tax. This sounds like a tax on a tax.” And on and on…
After letting the person blow off some steam, my response typically was, “Hey, don’t shoot the messenger! I’m here to see if any of your Social Security benefits are taxed, if so, how much and what we can do to reduce or eliminate that tax.” So let me take you through the first part of our conversation.
Whether or not you are taxed depends on:
1. The amount of your income.
2. Whether or not you have income from sources other than Social Security.
The amount of your tax depends on:
1. Your marital filing status: single or married.
2. The amount of your income.
The tax on Social Security retirement benefits was put into effect in 1983. Tax was applied on up to 50% of benefits. In 1993 this was increased to 85%. Here’s how the calculation goes…
The first step is to calculate your “provisional income”. So grab last year’s tax return.
1. Subtract your taxable S.S. benefits (line 20b) from your Adjust Gross Income (line 37).
2. Add one half of your total S.S. benefits (line 20a).
3. Add any tax exempt interest (line 8b).
4. The result is your “provisional income”.
Once you know this number, you can apply the rules to determine how much of your S.S. is taxed. Again, this depends on whether you are married or single and the amount of your income.
Let’s look first at a married couple filing jointly. Here is the math…
1. If your provisional income is below $32,000, you don’t have a problem.
2. For provisional income over $32,000:
a. Take the provisional income between $32,000 and $44,000 and divide it by two.
b. If your provisional income is above $44,000, take the total provisional income, subtract $44,000 and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefits (line 20a) by 0.85.
e. The lesser of your result on 2c and 2e above is the amount of your S.S. benefit taxed.
Now let’s look at the calculation for a single person…
1. If your provisional income is below $25,000, none of your S.S. benefits are taxable.
2. For provisional incomes over $25,000:
a. Take the provisional income between $34,000 and $25,000 and divide it by two.
b. If your provisional income is above $34,000, subtract $34,000 from your total provisional income and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefit (line 20) by 0.85.
e. The lesser of your result on 2c and 2d above is the amount of your S.S. benefit taxed.
Now that you know whether or not any of your Social Security benefits are taxable, and if so, how much, the next step is to take a look at the ways you can reduce or eliminate this tax. In general, there are three solution categories:
1. Reduce your interest income. The most common is interest on CDs.
2. Reduce your dividend income.
3. Reduce your tax exempt interest income.
Note: The calculations above use a very simplified approach. Your situation may have other factors that would affect the math. It is strongly advised that you consult with a qualified tax professional.
Leo
Retirement: Social Security vs Business Ownership
Christopher Anderson asked:
On June 8, 1934, President Franklin D. Roosevelt announced his intention to provide a program for Social Security. It was his goal to help protect millions of workers from poverty in their senior years. Over the years many changes have taken place and Social Security is very different from the original plan. Here are the top ten reasons that Social Security isn’t the best way to plan for your retirement.
1. There is no money left in Social Security’s Trust fund. The original plan was for people to voluntarily put money into an insurance plan. The money was then put into a Trust Fund that would be used only for paying retirement benefits. If more money was taken in than paid out the balance would be placed in an interest bearing account. During President Lyndon Johnson’s administration, the funds were made available for use in other government programs. For years Social Security has taken in more money that it has paid out; but instead of saving this surplus, the government spends the money and writes the Trust Fund an “IOU,” a special issue government bond to be paid back starting in 2017. The problem is that when the money comes due, it will still have to come from somewhere – taxes.
2. Social Security is subject to double taxation. Originally, the plan was to have the money paid into the program be tax deductible for income tax purposes. During the Clinton Administration, Social Security benefits became taxable. Now, you pay income tax on the money that is deducted from your pay check that goes into Social Security. Then when you receive it, you may be taxed on all or part of your benefits if you have other income besides Social Security. You have now been taxed twice on the same money.
3. Social Security is not enough to live on. Even if you work hard your whole life and pay into Social Security, there is a very slim chance you will have enough to live comfortably in retirement. I know of a woman who spent most of her adult life raising her family. At age 50, she will have to work until she is 70 to receive $566 per month. No one can live on $566 per month.
4. High Social Security taxes prevent many people from being able to accumulate a savings account. Social Security and Medicare taxes are 15.3% of earned income. With inflation at an all time high, few can afford to put away anything extra.
5. The current system is not fixable. The only way to fix Social Security’s problems is to raise taxes. This would have a major impact on average worker’s household budgets, would cost hundreds of thousands of jobs, slow the economy, and take a bite out of any personal savings. Although hire taxes might relieve some of the problem, it most likely would not solve it, leaving the potential for future tax hikes.
6. Money is better spent in the hands of the people rather in the government’s hands.
7. Social Security is not secure. As has been proven in the past, the laws and rules that govern Social Security change according to who is in office at the time. As new elected officials come in, new ideas come with them and change occurs.
8. As More people retire and live longer there are less people paying in. In 1950, there were 16 workers paying Social Security for every retired person receiving benefits. Today there are 3.3 per retiree. By the year 2020, there will be 2 workers paying in per retiree.
9. The more you make the more you pay. In the original program, participants would only have to pay 1% of the first $1,400 of their annual incomes into the program. Today, individuals must pay 15.3% of the first $94,200 and 2.95% on the rest of their income.
10. Being self employed gives you the choice between paying into Social Security and investing in yourself. For most of human history, people lived and worked on farms in extended families and this was the foundation of economic Security. They were self employed. As they grew older, children took over the family business and the retiree continued to receive income and benefits until death. When the Industrial Revolution developed, more and more people worked for other people. When they retired there was no more income. Thus Social Security was created. Today is no different than earlier times. If you own your own business, you can either have a family member take over the business or hire someone to run it when you are ready for retirement. You can receive income until you die and then you can Will the income to your heirs.
So, how does one solve the Social Security dilemma? Start a business that can continue to provide for you even after you are ready to retire. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily. For example, lets say you have a hobby of wood working. You have a room in your home and many tools you have purchased and you love to tinker and make decorative items out of wood. If you turn it into a business, now you can deduct all the tools and supplies you use to make the items. The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now. As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on. By making these things tax deductible you can limit what you pay into Social Security and invest that money in your business or a savings program of YOUR choice.
Owning a business is a good alternative to the current popular retirement plans. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep tax deductions that most people loose in their retirement years. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement. Owning a business gives you control over your quality of life when you choose to retire.
Joseph
On June 8, 1934, President Franklin D. Roosevelt announced his intention to provide a program for Social Security. It was his goal to help protect millions of workers from poverty in their senior years. Over the years many changes have taken place and Social Security is very different from the original plan. Here are the top ten reasons that Social Security isn’t the best way to plan for your retirement.
1. There is no money left in Social Security’s Trust fund. The original plan was for people to voluntarily put money into an insurance plan. The money was then put into a Trust Fund that would be used only for paying retirement benefits. If more money was taken in than paid out the balance would be placed in an interest bearing account. During President Lyndon Johnson’s administration, the funds were made available for use in other government programs. For years Social Security has taken in more money that it has paid out; but instead of saving this surplus, the government spends the money and writes the Trust Fund an “IOU,” a special issue government bond to be paid back starting in 2017. The problem is that when the money comes due, it will still have to come from somewhere – taxes.
2. Social Security is subject to double taxation. Originally, the plan was to have the money paid into the program be tax deductible for income tax purposes. During the Clinton Administration, Social Security benefits became taxable. Now, you pay income tax on the money that is deducted from your pay check that goes into Social Security. Then when you receive it, you may be taxed on all or part of your benefits if you have other income besides Social Security. You have now been taxed twice on the same money.
3. Social Security is not enough to live on. Even if you work hard your whole life and pay into Social Security, there is a very slim chance you will have enough to live comfortably in retirement. I know of a woman who spent most of her adult life raising her family. At age 50, she will have to work until she is 70 to receive $566 per month. No one can live on $566 per month.
4. High Social Security taxes prevent many people from being able to accumulate a savings account. Social Security and Medicare taxes are 15.3% of earned income. With inflation at an all time high, few can afford to put away anything extra.
5. The current system is not fixable. The only way to fix Social Security’s problems is to raise taxes. This would have a major impact on average worker’s household budgets, would cost hundreds of thousands of jobs, slow the economy, and take a bite out of any personal savings. Although hire taxes might relieve some of the problem, it most likely would not solve it, leaving the potential for future tax hikes.
6. Money is better spent in the hands of the people rather in the government’s hands.
7. Social Security is not secure. As has been proven in the past, the laws and rules that govern Social Security change according to who is in office at the time. As new elected officials come in, new ideas come with them and change occurs.
8. As More people retire and live longer there are less people paying in. In 1950, there were 16 workers paying Social Security for every retired person receiving benefits. Today there are 3.3 per retiree. By the year 2020, there will be 2 workers paying in per retiree.
9. The more you make the more you pay. In the original program, participants would only have to pay 1% of the first $1,400 of their annual incomes into the program. Today, individuals must pay 15.3% of the first $94,200 and 2.95% on the rest of their income.
10. Being self employed gives you the choice between paying into Social Security and investing in yourself. For most of human history, people lived and worked on farms in extended families and this was the foundation of economic Security. They were self employed. As they grew older, children took over the family business and the retiree continued to receive income and benefits until death. When the Industrial Revolution developed, more and more people worked for other people. When they retired there was no more income. Thus Social Security was created. Today is no different than earlier times. If you own your own business, you can either have a family member take over the business or hire someone to run it when you are ready for retirement. You can receive income until you die and then you can Will the income to your heirs.
So, how does one solve the Social Security dilemma? Start a business that can continue to provide for you even after you are ready to retire. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily. For example, lets say you have a hobby of wood working. You have a room in your home and many tools you have purchased and you love to tinker and make decorative items out of wood. If you turn it into a business, now you can deduct all the tools and supplies you use to make the items. The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now. As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on. By making these things tax deductible you can limit what you pay into Social Security and invest that money in your business or a savings program of YOUR choice.
Owning a business is a good alternative to the current popular retirement plans. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep tax deductions that most people loose in their retirement years. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement. Owning a business gives you control over your quality of life when you choose to retire.
Joseph
Introduction to Social Security
Joseph Kenny asked:
In order to address the routine concerns of many, regarding the payment of bills post-retirement or disability, a federal benefits program was designed in the United States, in 1935, known as the Social Securities Act. The program known as the social security program provides disability, retirement, unemployment and survivor benefits and Medicare. The benefits offered aim at providing financial support to the citizens of the U.S., who fall under the categories specified within the paradigms of the program.
The Social Security Act of 1935 introduced the social security system in the US. The system caters to the financial needs of the retired citizens, who have contributed to the social security trust fund for at least 10 years. It also provides benefits to the survivors, in event of the employee’s death. The other benefits offered cover disability and unemployment.
It is essential for the person to make the regular required contribution to the Social Security Trust Funds through the payroll taxes, to be eligible. By virtue of the provisions of the Federal Insurance Contributions Act or FICA, every worker’s income is subject to a tax payment of 12.4% on the first $94,200 earned during the year. Half of this amount or 6.2% is paid by the employer, while the other 6.2% is deducted from the salary of the employee. The amount is given to the government. Self-employed people are responsible for paying the full 12.4%. This amount is used fund the social security system.
The system has been designed to benefit those who make the necessary contributions for a period of ten years. There is a credit system incorporated in the scheme and you can earn a maximum of four credits per year. This means that irrespective of the higher limit of your actual earnings and consequently the quantum of your contribution to the fund, your earnings would entitle you to receive four credits.
The amount of the monthly social security check that you would receive after retirement would be calculated on the basis of your 35 highest income-generating years. You need to apply, to start receiving you social security benefits. The best time to do this would be a few months before your actual retirement date.
The social security program attempts to pay the retired citizens a pre-determined sum of money, to cover their basic needs. It works as a kind of insurance for the retired people, helping them to cope with financial difficulties, post-retirement.
It is a form of insurance that covers the surviving spouse and children, in case of the employee’s death. If the spouse is between 62 to 65 years, 70 to 99 percent of the benefits are payable. Dependent parents and unmarried children under 18 years are entitled to receive the benefits too.
Disability that prevents employment opportunity is also considered for benefits under the social security system. Physical and mental disabilities are also covered and the payment starts five months after proving the disability to the authorities.
Under the social security system, unemployment benefits are available to those whose unemployment is due to circumstances beyond their control. The program is designed to provide financial relief to the citizens of the U.S. at crucial times.
Chris
In order to address the routine concerns of many, regarding the payment of bills post-retirement or disability, a federal benefits program was designed in the United States, in 1935, known as the Social Securities Act. The program known as the social security program provides disability, retirement, unemployment and survivor benefits and Medicare. The benefits offered aim at providing financial support to the citizens of the U.S., who fall under the categories specified within the paradigms of the program.
The Social Security Act of 1935 introduced the social security system in the US. The system caters to the financial needs of the retired citizens, who have contributed to the social security trust fund for at least 10 years. It also provides benefits to the survivors, in event of the employee’s death. The other benefits offered cover disability and unemployment.
It is essential for the person to make the regular required contribution to the Social Security Trust Funds through the payroll taxes, to be eligible. By virtue of the provisions of the Federal Insurance Contributions Act or FICA, every worker’s income is subject to a tax payment of 12.4% on the first $94,200 earned during the year. Half of this amount or 6.2% is paid by the employer, while the other 6.2% is deducted from the salary of the employee. The amount is given to the government. Self-employed people are responsible for paying the full 12.4%. This amount is used fund the social security system.
The system has been designed to benefit those who make the necessary contributions for a period of ten years. There is a credit system incorporated in the scheme and you can earn a maximum of four credits per year. This means that irrespective of the higher limit of your actual earnings and consequently the quantum of your contribution to the fund, your earnings would entitle you to receive four credits.
The amount of the monthly social security check that you would receive after retirement would be calculated on the basis of your 35 highest income-generating years. You need to apply, to start receiving you social security benefits. The best time to do this would be a few months before your actual retirement date.
The social security program attempts to pay the retired citizens a pre-determined sum of money, to cover their basic needs. It works as a kind of insurance for the retired people, helping them to cope with financial difficulties, post-retirement.
It is a form of insurance that covers the surviving spouse and children, in case of the employee’s death. If the spouse is between 62 to 65 years, 70 to 99 percent of the benefits are payable. Dependent parents and unmarried children under 18 years are entitled to receive the benefits too.
Disability that prevents employment opportunity is also considered for benefits under the social security system. Physical and mental disabilities are also covered and the payment starts five months after proving the disability to the authorities.
Under the social security system, unemployment benefits are available to those whose unemployment is due to circumstances beyond their control. The program is designed to provide financial relief to the citizens of the U.S. at crucial times.
Chris
How Do I Apply for Social Security Disability Benefits? 5 Steps to Success
Becca asked:
Applying for any government program can be overwhelming. However, hundreds of thousands have navigated the confusing waters of Social Security, and you can too. Below are eight steps to success:
1) Decide if you want representation or if you want to represent yourself. Is it possible to get benefits with no legal help? Absolutely. However, your chances of being approved can jump significantly with legal representation. This may be because attorneys must be efficient at reviewing a claim, deciding what is needed to strengthen the case, and presenting it in the best way to show it fits the Social Security guidelines. If you are reluctant to make the commitment right away, you can always contact a disability center that completes the application for you for free.
2) Complete the application online or call Social Security’s toll free number. Make sure you complete the application in its entirety, with signatures in the right places and with all the information you can provide. Incomplete applications may result in being delayed or even denied.
3) Check up on your application and its status frequently. Social Security may send you letters asking for more information or to send you to see a doctor. This is because the evidence that determines your eligibility is mostly medical records, doctors’ notes, and employment information. If you have not seen a doctor recently, they may send you to see one funded by Social Security. If this is the case, it would be a good idea to find your own doctor to show a different opinion. Choose one who is respected and knowledgable in your medical condition. Tell him or her you are applying for disability and ask for an opinion. You can also have your medical records copied for you and/or sent directly to Social Security. If you have hired legal help, much of this will be handled for you.
4) If you are denied, don’t give up. Many, and in some areas most, applicants are denied at first. File your appeal immediately (don’t wait until after the deadline or you will have to start the process all over again). If you have hired an attorney, he or she may have some advice for you on what is needed to strengthen your case. If you are still representing yourself, continue to gather all the evidence you can. If you are at the hearing level, make sure to get all evidence in to Social Security long before the hearing date and show up on the hearing date on time.
5) Once you are awarded benefits, keep careful records of what you are paid and when. Keep all letters sent to you by Social Security. If they determine at any time that you have been overpaid or that your disability has ended, you will be required to pay back that amount.
It is a long and sometimes frustrating road, but it is possible. Best of luck.
Mildred
Applying for any government program can be overwhelming. However, hundreds of thousands have navigated the confusing waters of Social Security, and you can too. Below are eight steps to success:
1) Decide if you want representation or if you want to represent yourself. Is it possible to get benefits with no legal help? Absolutely. However, your chances of being approved can jump significantly with legal representation. This may be because attorneys must be efficient at reviewing a claim, deciding what is needed to strengthen the case, and presenting it in the best way to show it fits the Social Security guidelines. If you are reluctant to make the commitment right away, you can always contact a disability center that completes the application for you for free.
2) Complete the application online or call Social Security’s toll free number. Make sure you complete the application in its entirety, with signatures in the right places and with all the information you can provide. Incomplete applications may result in being delayed or even denied.
3) Check up on your application and its status frequently. Social Security may send you letters asking for more information or to send you to see a doctor. This is because the evidence that determines your eligibility is mostly medical records, doctors’ notes, and employment information. If you have not seen a doctor recently, they may send you to see one funded by Social Security. If this is the case, it would be a good idea to find your own doctor to show a different opinion. Choose one who is respected and knowledgable in your medical condition. Tell him or her you are applying for disability and ask for an opinion. You can also have your medical records copied for you and/or sent directly to Social Security. If you have hired legal help, much of this will be handled for you.
4) If you are denied, don’t give up. Many, and in some areas most, applicants are denied at first. File your appeal immediately (don’t wait until after the deadline or you will have to start the process all over again). If you have hired an attorney, he or she may have some advice for you on what is needed to strengthen your case. If you are still representing yourself, continue to gather all the evidence you can. If you are at the hearing level, make sure to get all evidence in to Social Security long before the hearing date and show up on the hearing date on time.
5) Once you are awarded benefits, keep careful records of what you are paid and when. Keep all letters sent to you by Social Security. If they determine at any time that you have been overpaid or that your disability has ended, you will be required to pay back that amount.
It is a long and sometimes frustrating road, but it is possible. Best of luck.
Mildred
Saving Social Security-The Future Of A Historical Piece Of Legislation
G. White asked:
Social security and its future are one of the most controversial issues discussed in politics today, with many different views and outlooks taking center stage. The law that was designed by Franklin D. Roosevelt to protect the elderly and provide services and compensation to them in retirement finds itself in a completely different context today than it was seventy years ago.
Yet, change is nothing new-it is a daily occurrence that has affected social security before, and that will continue to affect social security in the future. Understanding both sides of the issue of social security is vital to ensuring a positive future for this country.
Briefings On The Beginning
The beginnings of social security can be traced back to the tragedy of the nineteen thirties-the Great Depression. It was passed as part of the New Deal, and was very controversial at the time because it was believed that it would lead to a loss of jobs. Yet, the program prevailed. Payroll taxes were first collected in 1937, and retirement benefits were paid that same year.
Changes Throughout The Years
The Social Security Act has proven to be a very flexible program, as it has been altered and changed several times over the years. This is not surprising when taking into consideration the dramatic changes that have occurred in the workforce since its original implementation. The act was expanded in 1939 to encompass farmers and to provide benefits to spouses. Medicare was added in the 1960s. More changes were made in the seventies and eighties. If it was changed in the past, what is stopping it from being changed to meet the needs of the future?
The Problem Of People
Currently, 163 million workers are earning Social Security protection, and Social Security provides benefits to about 50 million people. The future problems associated with Social Security revolve around changing demographics. While the average remaining life span of a 65 year old in 1935 was about 12 years, it is currently 18 years. This increase in average life span is one of the major factors contributing to the uncertainty of the future of Social Security.
Another factor is the retirement of the baby boomer’s. The fifties and early sixties saw a huge increase in reproduction, and it is these offspring who will be retiring beginning in the next several years. At the same time that Social Security will need to accommodate more retirees, the amount of people paying taxes on Social Security will decrease from 3.3 people per retiree today to 2.1 people per retiree in 2032. It is the combination of these problems that is causing the panic regarding Social Security’s future.
Solving The Problem
There are many solutions being discussed regarding the Social Security program, and each of them would mean a trade off for Americans. Two of the solutions are somewhat obvious: increase the payroll tax, and decrease the amount of services provided to beneficiaries. These solutions would have obvious ramifications, and might only cause more problems for the future of Social Security than they would solve.
Another possible solution is to allow for early investment in Social Security in the form of a “pre funding” voluntary Social Security savings account. Although workers are currently unable to contribute to their Social Security funds before they retire, this proposal would allow them to do so. Critics say this plan would be expensive to manage, and it would be risky for beneficiaries as well.
A Middle Ground
Just as with any important issue, it would be nearly impossible to find a solution that would please everyone. Yet, the past of Social Security gives some hope for its future. If Social Security was fluid enough to be changed in the past, then we can have faith that it will be strong enough to handle any future changes.
Shawn
Social security and its future are one of the most controversial issues discussed in politics today, with many different views and outlooks taking center stage. The law that was designed by Franklin D. Roosevelt to protect the elderly and provide services and compensation to them in retirement finds itself in a completely different context today than it was seventy years ago.
Yet, change is nothing new-it is a daily occurrence that has affected social security before, and that will continue to affect social security in the future. Understanding both sides of the issue of social security is vital to ensuring a positive future for this country.
Briefings On The Beginning
The beginnings of social security can be traced back to the tragedy of the nineteen thirties-the Great Depression. It was passed as part of the New Deal, and was very controversial at the time because it was believed that it would lead to a loss of jobs. Yet, the program prevailed. Payroll taxes were first collected in 1937, and retirement benefits were paid that same year.
Changes Throughout The Years
The Social Security Act has proven to be a very flexible program, as it has been altered and changed several times over the years. This is not surprising when taking into consideration the dramatic changes that have occurred in the workforce since its original implementation. The act was expanded in 1939 to encompass farmers and to provide benefits to spouses. Medicare was added in the 1960s. More changes were made in the seventies and eighties. If it was changed in the past, what is stopping it from being changed to meet the needs of the future?
The Problem Of People
Currently, 163 million workers are earning Social Security protection, and Social Security provides benefits to about 50 million people. The future problems associated with Social Security revolve around changing demographics. While the average remaining life span of a 65 year old in 1935 was about 12 years, it is currently 18 years. This increase in average life span is one of the major factors contributing to the uncertainty of the future of Social Security.
Another factor is the retirement of the baby boomer’s. The fifties and early sixties saw a huge increase in reproduction, and it is these offspring who will be retiring beginning in the next several years. At the same time that Social Security will need to accommodate more retirees, the amount of people paying taxes on Social Security will decrease from 3.3 people per retiree today to 2.1 people per retiree in 2032. It is the combination of these problems that is causing the panic regarding Social Security’s future.
Solving The Problem
There are many solutions being discussed regarding the Social Security program, and each of them would mean a trade off for Americans. Two of the solutions are somewhat obvious: increase the payroll tax, and decrease the amount of services provided to beneficiaries. These solutions would have obvious ramifications, and might only cause more problems for the future of Social Security than they would solve.
Another possible solution is to allow for early investment in Social Security in the form of a “pre funding” voluntary Social Security savings account. Although workers are currently unable to contribute to their Social Security funds before they retire, this proposal would allow them to do so. Critics say this plan would be expensive to manage, and it would be risky for beneficiaries as well.
A Middle Ground
Just as with any important issue, it would be nearly impossible to find a solution that would please everyone. Yet, the past of Social Security gives some hope for its future. If Social Security was fluid enough to be changed in the past, then we can have faith that it will be strong enough to handle any future changes.
Shawn
Social Security Tax
Hans Hasselfors asked:
You should be able to find several indispensable facts about social security tax in the following paragraphs. If there’s at least one fact you didn’t know before, imagine the difference it might make.
Every week that you work, there are taxes deducted from your gross payroll that are distributed to the Social Security Administration, along with other programs administered by the government. Of all the taxes we pay, social security is one of the most beneficial, one of the most watched. Why do we pay social security tax, and what does it potentially mean for all Americans? The following article discusses the social security tax regulations and what we benefit from the mandated deduction.
Social security tax is deducted from our payroll each week in order to cover a portion of our retirement income when we reach age 65, but also a survivor benefit, should we become disabled during the course of our working life, or die as a result of work-in which case the surviving spouse and children would receive a monthly income supplement to help them with their daily expenses.
Each and every day, we are bombarded with statements that want to make us aware of the dire straits our social security system and the gloom and doom picture we face in just a few years. This article examines the information available about our social security system, and asks the questions about its fate and ours.
The social security tax we know and pay today has become a greater chunk of our income with the passing years. And, as if this is not enough, it is the poorest of this nation that pay the most, since there is a cap on the income levels that are subject to the social security tax. Currently, any income above $90,000 isn’t subject to social security tax. This presents a problem for the nations poor and the federal government’s level of social security tax received. As more and more of our population begin to age, there are fewer and fewer based employees to sustain the fueled growth and maintenance of the social security system. Add to this the fact that individuals with wage earnings beyond $90,000 are growing faster than the wage base for employees who remain below the $90,000 level, and you have the makings of a disaster. The latest predictions place the collision date somewhere around 2017. That’s not an extremely distant future, and it certainly will be a problem for the 45-50 year old wage earner.
So what has been proposed to deal with this growing problem? There are currently several proposed solutions to the problem, and all of them, with just a few exceptions point to higher taxation of the wage earners income. It is interesting to note here, that when income tax and social security, Medicare, and the many other “beneficial” programs the government has implemented to aid the general public, we have lost in the area of disposable income. In 1913, when the income tax program was begun, less than 1% of the average individual’s income was taxed. Today, we pay roughly 10% of our income in tax. That’s a staggering rate of growth, when you consider that our income levels have also tremendously increased too. The following paragraphs briefly outline some of the more popular proposals for dealing with the projected shortfall, and the effect it should have on “Joe Citizen”.
The information about social security tax presented here will do one of two things: either it will reinforce what you know about social security tax or it will teach you something new. Both are good outcomes.
Increases in FICA taxes; of course, this is a hard sell in the current climate, but by the time we reach 2017, it might look like a better solution than any of the others.
Increases in normal retirement age (NRA) have already begun, and it looks like it is going to be an ongoing process. As our life expectancy increases, the ability of social security to accommodate greater payouts, and a reduction in the working population continues, extending the NRA on past the age of 70 is a real possibility.
Privatization of social security; although on the surface this looks like a promising solution, it would take a special kind of citizen to intelligently, objectively, and rationally invest their 4% allocation wisely, and truly reap the benefit that social security has previously provided.
Selling bonds or printing money. The US Treasury does have the option to intervene and raise the money to accommodate the excess demand, but you increase the probability of runaway inflation when you begin to pump excess money into the economy.
What is the ultimate solution for this problem? No one really knows, simply because no one can accurately predict long-range models. 20, 30, of even 40 years into the future, accurate predictions are extremely hard to come by.
That’s how things stand right now. Keep in mind that any subject can change over time, so be sure you keep up with the latest social security tax news.
Jim
You should be able to find several indispensable facts about social security tax in the following paragraphs. If there’s at least one fact you didn’t know before, imagine the difference it might make.
Every week that you work, there are taxes deducted from your gross payroll that are distributed to the Social Security Administration, along with other programs administered by the government. Of all the taxes we pay, social security is one of the most beneficial, one of the most watched. Why do we pay social security tax, and what does it potentially mean for all Americans? The following article discusses the social security tax regulations and what we benefit from the mandated deduction.
Social security tax is deducted from our payroll each week in order to cover a portion of our retirement income when we reach age 65, but also a survivor benefit, should we become disabled during the course of our working life, or die as a result of work-in which case the surviving spouse and children would receive a monthly income supplement to help them with their daily expenses.
Each and every day, we are bombarded with statements that want to make us aware of the dire straits our social security system and the gloom and doom picture we face in just a few years. This article examines the information available about our social security system, and asks the questions about its fate and ours.
The social security tax we know and pay today has become a greater chunk of our income with the passing years. And, as if this is not enough, it is the poorest of this nation that pay the most, since there is a cap on the income levels that are subject to the social security tax. Currently, any income above $90,000 isn’t subject to social security tax. This presents a problem for the nations poor and the federal government’s level of social security tax received. As more and more of our population begin to age, there are fewer and fewer based employees to sustain the fueled growth and maintenance of the social security system. Add to this the fact that individuals with wage earnings beyond $90,000 are growing faster than the wage base for employees who remain below the $90,000 level, and you have the makings of a disaster. The latest predictions place the collision date somewhere around 2017. That’s not an extremely distant future, and it certainly will be a problem for the 45-50 year old wage earner.
So what has been proposed to deal with this growing problem? There are currently several proposed solutions to the problem, and all of them, with just a few exceptions point to higher taxation of the wage earners income. It is interesting to note here, that when income tax and social security, Medicare, and the many other “beneficial” programs the government has implemented to aid the general public, we have lost in the area of disposable income. In 1913, when the income tax program was begun, less than 1% of the average individual’s income was taxed. Today, we pay roughly 10% of our income in tax. That’s a staggering rate of growth, when you consider that our income levels have also tremendously increased too. The following paragraphs briefly outline some of the more popular proposals for dealing with the projected shortfall, and the effect it should have on “Joe Citizen”.
The information about social security tax presented here will do one of two things: either it will reinforce what you know about social security tax or it will teach you something new. Both are good outcomes.
Increases in FICA taxes; of course, this is a hard sell in the current climate, but by the time we reach 2017, it might look like a better solution than any of the others.
Increases in normal retirement age (NRA) have already begun, and it looks like it is going to be an ongoing process. As our life expectancy increases, the ability of social security to accommodate greater payouts, and a reduction in the working population continues, extending the NRA on past the age of 70 is a real possibility.
Privatization of social security; although on the surface this looks like a promising solution, it would take a special kind of citizen to intelligently, objectively, and rationally invest their 4% allocation wisely, and truly reap the benefit that social security has previously provided.
Selling bonds or printing money. The US Treasury does have the option to intervene and raise the money to accommodate the excess demand, but you increase the probability of runaway inflation when you begin to pump excess money into the economy.
What is the ultimate solution for this problem? No one really knows, simply because no one can accurately predict long-range models. 20, 30, of even 40 years into the future, accurate predictions are extremely hard to come by.
That’s how things stand right now. Keep in mind that any subject can change over time, so be sure you keep up with the latest social security tax news.
Jim
