Government

The Social Security entitlement. You did not pay for your Social Security benefit🤑

Look at various websites and memes on Facebook, listen to comments from seniors and you may be convinced that 1️⃣ Social Security is not an entitlement, 2️⃣ Retirees paid for their benefit through taxes and 3️⃣ the benefit was earned.

Oops, sorry, I meant to take it from another pocket

Oops, sorry, I meant to take it from another pocket

Here are some facts to consider. Until recent years the SSA Administration sent out your earnings record each year around your birthday. It showed how much you and your employer paid in taxes your entire working life.

I looked at mine for the year before I began collecting Social Security.

What is shows is that my wife and I received in benefits an amount equal to all my taxes paid since 1959 within only 2.510 years of starting our benefit (adjusted for COLAs).  My benefit alone recouped all taxes in 4.091 years. If you count the employer contributions as well, we received a benefit equal to both my and my employers contributions in only 5.020 years

STILL THINK YOU PAID FOR  YOUR SOCIAL SECURITY BENEFIT?

So, who is paying for my benefits? My children and your children and someday their children. Social Security is currently using every penny of taxes collected to pay today’s benefits. Nothing is being accumulated to pay benefits to the people paying taxes. In addition, all taxpayers are paying because the government pays the trust interest on the Treasury Bonds it holds.

Somebody should ask Bernie Sanders about that.

maninrockingchairBut it gets worse. For anyone collecting a benefit, who was divorced and remarried, two spouses or more could all be collecting a benefit off the workers account. Or a person who was single all their life and married a year before collecting SS would also collect a spouses benefit. Except for recent anomalies,  my benefit, my wife’s benefit and yours increases each year.

If I wanted to buy an annuity (without a COLA) for my life and guaranteed for 20 years to provide for my wife, it would cost me about $950,000; far more than I paid in Social Security taxes and over four times the combined taxes paid by me and my employers since 1959.

Not an entitlement you say? 🤑

Note: One could argue that if I could take those taxes and invest them for forty-years, I would have far more than even the $950,000. That’s surely possible, but also not a possible result. In any case, it’s not the point of all this because you can’t do it.

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11 replies »

  1. Hi! Tengo 46 años y me hayo aprendiendo inglés desde hace 9 años.
    Este comentario me ha parecido increíble para la memorización del idioma inglés.

    Me ha sido muy práctico. Lo voy a anexionar a mis favoritos.

    Te agradezco por el post.

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  2. Sorry. Ignoring the present value (potential earnings) of your contributions and those of your employer makes your comparison totally false.

    I bet you don’t look at your defined benefit pension monthly check nor your 401(k) or IRA minimum required distribution that way – limiting the value solely to your contributions and those of your employer.

    Any comparison that doesn’t adjust for present value / potential earnings is not a valid comparison. The fact that you can’t opt out is not a valid of a reason to exclude potential earnings/present value.

    For example, say you bought a life insurance policy today with $100,000 face value, paid the initial premium and died next week. Is the value of that policy to your survivors only the premium you paid? No, obviously not. The same is true with regard to the pension benefit. You and the company may have only contributed $100,000 over your lifetime in anticipation of the benefit you are to receive, but, you don’t value that, instead, you value the $25,000 a year (which is what the formula provides, funded in part by not only contributions but earnings).

    And so it is with Social Security. It would be invalid and erroneous to determine cost by treating $1 paid this year the same as a $1 paid 40+ years ago.

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    • The fact that Congress bought votes by providing benefits to depression era and greatest generation folks that dramatically exceeded what they funded (or what they never funded) through their working lifetimes should NOT be a rationale for increasing FICA taxes on current workers in the Baby Boom, Gen X, Millenials and generations to come.

      Don’t forget Ida Mae Fuller. She paid in all of three years, and after amending the initial law, was permitted to accelerate her claim for benefits – commencing in 1939 @ $22 per month. She lived until the 1970’s drawing over $25,000 in total benefits – even though she contributed less than $90! She also qualified for full Medicare benefits, even though she never contributed $.01!

      Call it what it was – a welfare benefit. Fund it with increases in general revenue taxes – e.g., raise general revenue taxes now to fully fund/make social security sustainable.

      This should not be treated any different than other forms of federal debt that result from Congress promising more than they were willing to tax – as a means of buying votes.

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    • My only objective was to point out to those who feel they paid for their benefit or that SS is not an entitlement how wrong they are. When a person can have two ex wives a current wife and they can all collect on a benefit and then survivor benefits all that has hardly been paid for by payroll taxes.

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      • I was surprised to see that Melton Friedman called Social Security the biggest wealth transfer to the richer middle income and upper income workers from lower income workers.Sold to the worker, in the name of helping the poor, in retirement . No one paying SS taxes are paying enough to cover what they will receive in benefits. The rich who need the money less than the poor worker in retirement receive the bigger checks, so their total benefits will be thousands of dollars more. What you receive in benefits has no relationship to what you paid in taxes. A retiree who gets the maximum SS benefit at age 70 with a non working spouse will receive $63,684 per year = $955,260 in benefits by age 85.. The average worker with a non-working spouse will receive $24,490 per year = 563,040 by age 85. Both a windfall. The poorer worker not the average worker will be in the worst shape, because he never had any extra income to save for retirement and qualifies for additional government assistance that may or may not get him out of poverty. My 86 year old mother gets $92 in food stamps and $700 in Social Security. Not what I would call security.

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      • There is a relationship to taxes and the benefit given taxes are based on earnings and so is the benefit calculation. In addition, the formula favors lower income people providing a higher replacement on lower earnings.

        I think your benefit calculation is a bit high. It’s more like $46,000.

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      • I stand corrected, your age 70 benefit is correct, but of course is an actuarial adjustment so total benefits are unchanged.

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      • The replacement of earnings may be a higher percentage for the lower income worker. But, the higher income worker who has had higher income, gets a much bigger check. That is why I believe at some point the government is going to means test Social Security benefits; just like all other welfare programs, which is what SS really has always been. Everyone needs to read that Social Security statement closely it says benefit calculations are based on current law and Congress may change the law..The changes in the law are coming in 2033.

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      • But those higher benefits are proportional to higher taxes paid and of course both are limited to what ever the taxable wage may be. It’s quite possible for a married person earning $60,000 a year to collect a couples benefit exceeding the single workers benefit earning $130,000 a year while still paying less in taxes.

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      • The higher income worker benefits two ways during their career. They have higher wages so they have more income after taxes and because their employer pays the SS tax on their higher income they get the higher benefit check when they retire. Many claim we should get rid of SS and the worker would get paid more, but there is no way of knowing if the employer did not have to pay the SS tax that they would pass the savings to the worker. SS needs to be changed and funded fully, the only way to do it might be to give every retiree the same amount each month. After all, it is just a welfare program, the government can change it at any time. .

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  3. I tell friends and family that they did not pay enough in taxes to cover their benefit, all the time. Most respond with – yes but I paid in all those years, so I deserve the benefit. They need to raise the SS tax rate or income tax to add money to the SS trust fund, not cut taxes. If D. Trump gets a business and individual tax cut through Congress with out fixing Medicare and SS shortages the crap will hit the fan in 2034 if not sooner.

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