Interesting - I had no idea the percentage was that high.
I’d definitely agree with abolishing the cap - when SS was reworked a couple decades ago, they got rid of the cap on the Medicare part. Most earners wouldn’t even notice that the deduction was continuing. And the formula is already set up so that lower earners get a better benefit per dollar earned than higher earners.
I don’t see anything in that cite supporting your statement. Household incomes are that high, but household income may include multiple wage earners and income from investments (which has never been subject to FICA). Based on BLM data of usual weekly earnings, more than 90% of wage-earners earn less than $135K/year.
But none of those other types of retirement savings, such as IRAs and 401k, really are a similar situation, because for none of those are your earnings based on Years of Service TIMES Average Wage TIMES some arbitrary percentage. Government pensions that are not based on wages earned are not subject to the government pension offset. Also, the years you spent contributing to a 401k have no effect on how much you receive from Social Security, but the number of years you contributed to a non-covered pension plan WILL impact your Social Security benefits, even in the absence of the government pension offset.
I’m one of those hated fatcats who earn more than the SS max. Usually I quite paying in by about June. The extra cashflow after then from the tax cut when my SS withholding ends is darn nice.
But guess what: my earnings for benefit calculation purposes are also capped at the SS max. If I paid SS taxes on the other half of my W2 income, I’d also expect to receive SS benefits on that extra money I paid in. And given the attitude of the evil RW folks proposing these changes, I probably would get that.
Yes, the whole system is very progressive and for me SS is a crappier investment than it is for a low-wage worker. Which, IMO, is as it should be. “From each according to his ability; to each according to his need” is the correct way to organize a society.
But be very clear: the whole politico-psychological underpinning of SS in the virulently anti-“socialist” USA is “everybody pays in, everybody gets out.” You can’t keep the “everybody pays” part while further gutting the “everybody gets” part without a backlash that will simply kill the whole system. Provoking said backlash may be exactly the RW plan.
From my cite:
about 8.3% of the population earned between $150,000 and $199,999
about 10.3% of the population earned over $200,000.
Looks to me that over 18% of Americans earn over $150k each year.
I believe that your cite states that more than 90% of wage-earners earn less than $235K/year.
How well has that theory worked out in actual practice?
Those statistics come from the page section labeled “About 30.7% of households were earning over $100,000 in 2020” (emphasis added), and both of the sources linked (IbisWorld and Statista) are to statistics about households. Like I said, this includes multi-earner households and non-wage income. Your cite doesn’t say that 18% of individual Americans have jobs paying more than $150K, and in a two-income household earning $200K, it is likely that wages for each person are under $150K and hence alresdy fully taxed. (Just over half of all American households are dual-income.)
How do you figure that? The Bureau of Labor Statistics says that the ninth decile (90th percentile) of all wage-earners aged 16 and up earned $2583/week, and multiplied by 52 weeks that comes to $134,316, an amount already fully subject to FICA taxes.
You’re seriously going to go there? Because if you’re earning $300k+, a lot of folk might feel you are “able” to pay more, and “need” less than you are getting.
But they’re not in a similar situation to you - as a government employee with a non-exempt pension I paid SS taxes on every dime I earned during my working life. A government employee with an exempt pension did not. If I had ten years of employment subject to SS taxes (before , after or simultaneously with my govt employment) , it would not lower my average monthly wage over 35 years. It would increase my average monthly wage and therefore decrease the percentage of my income replaced or possibly not affect my benefit at all.
These are the percentages for 2022 ( AIME is adjusted monthly earnings)
So let’s say that you and I are similar in every way, except that your pension is exempt and mine is not. We each earned an inflation adjusted 70K per year at our government jobs where we worked for 35 years and we each had 10 years of earning an additional 10K (before, after or during the government work) Retirement time comes around . We each get our pension. I get my SS check based on my 35 years of covered employment - my AIME is $5833 and I get 90% of the first $1024 ( $921) plus 32% of the remaining $4809 ( $1538) for a total of $2459.
If you received your SS benefit based on the standard formula , with no pension adjustment , you have earned $10,000 x 10 years = $100,000. Divide by 420 months and you get an AIME of around $238. Your benefit will be 90% of that which comes to $214. My benefit is going to vary some depending on whether that additional $10K per year was simultaneous with my government job or not - if those 10 years were either before or after my government job, I will get nothing additional as my 35 highest years were working for the government. If they were simultaneous ( I had a part-time job), I will get 32% of that additional $238 in monthly income which comes to about $76. That’s what the offset is supposed to account for - the fact that your exempt government job makes you look poorer than you really were, and the standard formula would mean you benefit more than I do from that $10K times 10 years income even though we had the same total income.
I agree. I believe means-testing social security would be a great way to kill it (something I’m very much against). I am supportive of raising/eliminating the cap on taxed amount.
And some people, not all, but some (not the wisest) would perceive that as a reason not to save for retirement themselves.
I don’t like that social security is taxed (and that it was set at an unindexed number when that was put into place), but that’s very old news.
Unfortunately, Social Security was built on the young paying for the old. Now we have fewer young and more old than we did then. I have to admit, as a middle-aged person, the idea that I (or more likely younger people) should have to pay a far larger percentage into social security than our elders did, but then in return get a far smaller benefit than they did is extremely irritating. But, again, demographics are what they are (and I didn’t provider any payers for the next generation, myself).
This is an interesting thought. This provides me even more reason to totally disregard what I might get from Social Security in the future, since I have done nothing, and plan on continuing doing nothing, to help prolong it by creating more of the next generation.
I graduated from high school almost 40 years ago, and began paying into social security several years before that. I will be eligible for social security distributions in about 5 years. I’ll likely defer drawing at that time.
I was told by my parents, friends, educators, politicians, etc. that I shouldn’t count on social security to support myself and my family in my retirement years, and have lived and planned my life accordingly.
I will take it when I’m able to maximize my distributions, as in my way of thinking, it’s my money, I paid into the government scheme, why shouldn’t I benefit from it as well. I do not believe that it will dry up, become defunded, etc. SS is a political football that gets thrown around regularly for votes, etc.
I retired at the age of 60 and immediately started collecting my late wife’s survivor benefits of $1100/month.
Ten years later, I’m about to turn 70. When I do, I will lose her benefits and start collecting my own benefits of about $3900/month.
My wife already collects $2600/month in benefits, plus $2100/month from her State pension plan. Her pension plan covers our health plan as well at extremely low cost.
So we will receive (as a couple) about $8600/month in SSI and pension payments before we even dip into our investment portfolios or 401Ks. May not seem like a lot, but we have no kids in college and only a few years left on a very good mortgage.
This leaves us pretty pleased, but I damn sure don’t know how to be certain that this will last. I’m hoping someone does.
SSI (Supplemental Security Income) is something completely different from Social Security that just happens to share letters. I don’t know why people refer to Social Security as SSI; where does the I come from? If you’re receiving that much in retirement benefits from various sources, you’re definitely not on the actual thing that’s supposed to be called SSI.
My mistake. I got on a role and started typing “SSI” in error. It’s an abbreviation used in my line of work and I totally got in an auto-pilot mode.
I hope you know how good you have it. The average monthly SS payment is well under $2,000.
Yeah - seems odd to say that “may not seem like a lot.” Obviously not one of the many who depend on SS for most if not all of their retirement income…
Very odd - $8600 a month is over $100K a year. I will be receiving a bit more than that between my pension and both of our SS payments when we start collecting at 62.* It’s less than what we earned with both of us working but I would never say “it may not seem like a lot”. It’s more than a lot of households ever earned
* My pension is more than Mrs. ZonexandScout’s - enough to more than make up the difference between the $3900 or so I would get from SS at 70 and the amount I will get at 62.
Yeah. I also will be receiving (IMO) pretty generous SS bens, plus a pension, plus my 401k. Yeah, I know “I paid into it,” but I personally advocate needs testing for SS retirement bens. IMO, I consider myself fortunate that I was as successful as I’ve been, and am happy for a larger portion of SS to go towards a safety net for folk less fortunate.
But, IME, not a ton of relatively successful folk feel the same.
I don’t feel the same. I retired when I did taking my future SS into account to supplement my 401k. It’s not like I’d be starving if the SS part didn’t happen but a deal is a deal. I put into the system for over 40 years starting when I was 15.
Right. I’m comfortable saying the majority of folk feel that way. Which I attribute to the government’s presentation of SS as a forced savings rather than wealth redistribution plan.