Social Security

What would it cost the average American to save Social Security for the next 75 years?Β 


All the candidates for President have schemes to “save” Social Security. Here is a simple summary to date. Of course, Republicans propose to trim future benefits while Democrats want more taxes and even higher benefits and liabilities. They are all nuts.

The Center for Retirement Research at Boston College published the Social Security FiX-it book exploring various proposals to fix Social Security with their pros and cons. One proposal is to simply raise the payroll tax. Doing so will fix Social Security for the next seventy-five years. Of course, the “con” is that it will raise everyone’s taxes and hurt the lower-income worker the most. That scenario is usually accepted out of hand. But let’s think about that for a minute.

The tax would have to be raised by 1.45% on workers (and employers). For the worker earning $50,000 that equals $13.94 a week which seems a small price to pay for future financial security. For a worker earning $40,000 it’s $11.15 a week.

Even lower-income Americans can find that kind of money, but even in the worst case, based on MAGI offset all or a portion of the additional tax with an income tax credit which of course spreads some of the burden on higher income tax payers.

In 2011 and 2012 the payroll tax was decreased by 2% for workers.  I talked to dozens of people about saving that 2% in their 401k; none of them even knew the tax was reduced. When it was finally raised to the correct amount did people even notice, did the sky fall? Do you even remember the tax reduction and increase? Do you realize it was funded with debt to be paid by future generations?

Can workers afford a 1.45% increase? Sanders and Clinton would say, he’ll no‼️ But why not? As always, it’s a matter of setting priorities.

For example:


And it’s those who can least afford to lose any money who are most likely to be buying tickets. Low-income people account for the majority of lottery sales, while sales are highest in the poorest areas. One study found that the poorest third of households buy more than half of the tickets sold in any given week. Source:

Exactly what is unfair about asking everyone who enjoys the benefits of Social Security to fairly share the cost burden? [especially given the lower-income citizen receives a disproportionately larger benefit] We are not talking about people unable to buy food or shelter, we are talking about perhaps skipping a few lottery tickets or other small non necessity or working one hour overtime a week. 

The real crime here is that if Congress had acted back in 2000, the required tax increase would have only been 0.95%πŸ™„

Of course there is another option, start a national lottery and dedicate all the proceeds to Social Security … wait, that means the same lower-income Americans would be paying more than their fair share πŸ€‘πŸ€‘πŸ€‘πŸ€‘πŸ€‘


15 replies »

  1. Some of the numbers are not correct. The current estimate of the SSA for 75 year solvency is 2.68%, which is the most optimistic view of a favorable economy. CBO pegs the figure at 4.4%. 1.45% is old, or hides the full cost. Most economists accept that wage taxes are absorbed by the employee in the form of lower wages.

    75 year solvency doesn’t really mean 75 years. In 1983, the system was projected to be solvent for 75 years. We are on course for 2027 rather than 2058. If we get the same level of forecasting success, we aren’t even solving the problem of Boomers.

    We are telling the next generation just don’t let the consequences fall on us.


  2. No COLA for my sister and mother this year. I will be starting SS in 2 years, my benefit went up $30 per month, I assume this is because of the wage tracking SS uses. I say switch to only raising future benefits by the same amount as the COLA. This I am sure will lower the shortage over time.


  3. I am missing some points here. What is the difference of how poor people spend their money? Because they buy lottery tickets they should be taxed more? If it wasn’t for these poor people playing the lottery (I’ll call the poor people’s pray to get out of debt tax), many states depending on which state the lottery is in, that state would either have to cut programs or raise taxes.

    Many people do not get overtime and in fact many people are working two part-time jobs so the suggestion to work an extra hour overtime is totally off base.

    I do believe that the tax should not be capped at $118,500 of income either.

    Could people save more for retirement, yes. But those people were also promise a level of entitlements and should expect to received them based on the politicians lies. The politicians lack of action is only making the problem they created, worst.


    • The difference is a matter of priorities not just the poor everyone. The point is that while the left agonizes over what the “poor” cannot afford, including in this case taxes to support their own future retirement, they are spending their on many other things behind necessities; thus money available to help secure their own well being.

      So, is it your view that while some people can throw away money others who earn say above $118,000 should pick up the slack?

      This is much like the cost of health care. The co-pay and deductible are not affordable because they are considered outside ones budget instead of part of it. What may not be affordable is smoking, drinking, a vacation, sports tickets, etc. and yet we never question that spending. It’s always the health care.


      • Regards to the $118,000 dollars question, I will get back more than what I have paid into social security or my wife will so to quote you above, I am willing to tax myself to support my own future. It should be like Medicare tax limit which I believe is none. Now I do not believe that social security is or should be a retirement plan but companies and government has made it so and it is part of my future expected retirement income. All the financial planner include social security, I don’t expected it to be there for me.

        While I agree people make poor spending and saving choices, in your opinion at what point are they permitted by you to go on vacation or buy a lottery ticket. Is it when they have 25 times their current salary saved?

        A co-worker of mine knows he will have to work until 65 or later. We started the same time and make the same. His choice was to see the world. He works to travel. I am working to retire and may be making a mistake by waiting to do things in retirement. His wife has a medical condition that by retirement will prevent traveling. So is he wrong?

        I know poor people who have never left this state. Do you think it will matter in their non-existent retirement if they had a chance to go see the Status of Liberty or the Liberty Bell that they should not go because you think saving the $100 is going to change their life when they are 60? Yes I get your point the some of these same people spend $50 in booze a week or whatever but they have no hope or can’t see retirement. These are the same people who are told mostly by democrats that government will take care of them.

        As far as people who could save money but don’t, Wall Street, Madison Ave, and our government depend on consumer spending. The government encouraged the housing boom. The government discourages savings. Until that changes you’ll have a hard time convincing people to save for a tomorrow that might not happen verses spend now to keep people employed.


      • First, there is no doubt that Social Security will be there for you regardless of your age. No politician will allow it to go away. In fact, because employers have largely abandoned pensions, in the future SS will play a greater role in my view.

        As to saving, the formula is very simple and one I followed from the first job I had in 1961 and all through raising four children and sending them to college.

        Regardless of what you earn, you save (and actually invest) at least 8%, ideally 10% and your net take home (and increase it as your bills decline such as a mortgage being paid off) income becomes your base for your standard of living. No credit cards can be used.

        Once you do that you don’t need a budget; spend whatever you want on anything you want. If you don’t have enough money to do what you want, you either don’t do it or find a way to get more money. And yes, there are always possibilities for resourceful people). It’s quite simple really and relatively speaking it will work at virtually any income level.

        Now granted there may be a lot of wants and desires unfulfilled at times (I never took my kids to Disney or ever had a grand vacation until later in life), but it can be done and it’s a lot easier sleeping at night knowing you are saving for the future and there is no credit card debt hanging over your head.

        The problem today is that people today think they deserve everything the want and they deserve it now.

        My father sold cars for a living working seven days a week while I was growing up, but most of the years he just used cars from the dealer because he couldn’t afford to buy one. In 1963 he started selling Mercedes. I fell in love with the car. I have a picture of me sitting in one when I was twenty and on the back I wrote, “Someday I will own one.” That picture now is in the glove box of my Mercedes that I finally was able to buy fifty years later and after saving in a special account for twenty-years. Perhaps at age 72 it was a foolish purchase, but it came after many years of being prudent.


    • The problem with raising the cap on taxes is that you remove the link to benefits – since that cap also limits benefits. And, the further and further the benefits lag the taxes, the further you move the benefit away from a “base” of income at Normal Retirement Age, the less support you will find for the “social” in this social insurance system. Finally, the solution is always promise more and more benefits, and tax someone else – known as “don’t tax you, don’t tax me, tax that guy behind the tree.”

      All you are doing is shifting the lack of appropriate funding in the past to future generations, and disproportionately to future retirees who are already getting a NEGATIVE return on their contributions if they earn more than the median wage in years after 2016.


      • rd, I bet you would just love my 1966 Mercedes 250 SE with gasoline mechanical fuel injected motor and 4 speed tranny.
        I love all the thumbs up I get when driving the car around town. It was great for about the first 3 years as a daily driver, but now it is turning into a money pit. I may end up parting it out, the running motor with the injector pump is worth $3,500 .
        I would like to get a SLK 350 within the next 5 years, save, save, save. Does anyone but us old timers save for anything today???


  4. Your $13,94 ignores the duplicate amount paid by employers. So, double that amount as even if the employer does not reduce wages or other rewards, it will dampen their willingness to raise wages.

    If you don’t agree, why not simply raise employer contributions 2.9% (leaving employee contributions unchanged) since, as Bernie and Hillary would argue, it would be a “free lunch”, employers would shoulder these burdens and not pass them along to the workers themselves, since these politicians deal in static economic models, not dynamic models.

    Of course, you also anticipate that people won’t change their financial position nor their willingness to work – once the tax burdens are changed and shifted again.

    You also assume that the current benefit structure is optimal – which is where Bernie and Hillary would argue it is not, that there needs to be even more progressive in terms of the bend points, Bernie arguing for the lowest income folks, and Hillary arguing that it the formula reinforces the war on women. So, they would hold tax increases hostage in exchange for a minimum benefit, or a per capita added benefit to supplement the existing program. Further, using a single or flat rate won’t work for those folks either. They would argue for a progressive, not flat rate of taxation, perhaps using the same scale (in reverse) as applies up to 400% of the Federal Poverty Level for health reform tax subsidized coverage. And, be careful here, changing the existing 6.2% OASDI rate to a progressive rate as well.

    Bottom line, suggesting a one size fits all taxation solution for Social Security funding shortfalls is how we got to where we are today … as the idiots continue to promise more and more, that there is some font of money out there where you can have more and other people will pay.


    • I did mention an equal tax would apply to employers. I think you make my case for a “simple” solution so everyone can see the true cost. That’s how it was supposed to be all along. The danger as you point out is that politicians continue with improvements that are not and have not been paid for. But that would be true in any scheme I fear.

      Those who want higher benefits should tell Americans exactly what that will cost … in terms of everyone’s pay.


      • No, if you recall a prior post, where I suggest the better solution is that everyone is responsible for their portion of closing the funding deficit, not just those with wage income subject to FICA, I think you will avoid the inter-generational and income class and/or wealth class challenges of a single solution in the form of a tax increase.


      • The individual beneficiary’s election is annual, and the price tags of the solution selected by each individual are updated annually. The target is to eliminate the funding deficit through solutions that balance spending and funding in the current year, in each of the next five years, projected at 10 years, 25 years, 50 years, 75 years, and indefinitely. The concept is to avoid “solutions” that only involve a few of the beneficiaries of the system, and only burden current and future taxpayers. The concept is to avoid solutions that only apply to higher income individuals (e.g., removing the cap) that are class-based solutions, and to avoid solutions that only apply to future taxpayers (e.g., raising taxes, reducing future benefits, chained CPI, etc.)


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