Recently I wrote a blog on HumbleDollar.com about the growing trend for older Americans having young children. But there is even more to that than I thought about.
As you may know, Social Security is far more than retirement benefits. But how much more comes as a surprise to many. I question that Social Security was originally intended to subsidize life choices, but nevertheless that is the case.
Survivor or disability benefits is one thing, but that’s not what this is about. And keep in mind that everyone pays the same percentage of income into the program regardless of family status while benefits increase substantially with family status.
The 72-year-old tycoon-turned-president is eligible for benefits based on his earnings record as a real estate mogul in New York. And because 12-year-old Barron is underage, he would also qualify for Social Security payments on his dad’s record — 50 percent of his father’s benefit — until he reaches 18 or is out of high school. The maximum monthly check for a worker first claiming at full retirement age, is $2,788 in 2018. Trump’s wife, Melania, 48, may be able to collect benefits because she is caring for Barron, though those payments to her will stop once he turns 16. When she turns 62, she can start collecting spousal benefits.
“In 2017, we distributed an average of $2.6 billion each month to benefit about 4.2 million children because one or both of their parents are disabled, retired, or deceased. Those dollars help to provide the necessities of life for family members and help make it possible for those children to complete high school. When a parent becomes disabled or dies, Social Security benefits help stabilize the family’s financial future. Source: SS.gov“
Keep in mind we are not talking about disabled people or even poor people. We are talking about individuals who had children later in life and decided to retire and/or begin their Social Security benefits.
“When you start receiving Social Security retirement benefits, some members of your family may also qualify to receive benefits on your record.
If they qualify, your spouse or child may receive a monthly payment of up to one-half of your full retirement benefit amount. These payments will not decrease your retirement benefit. In fact, the value of the benefits your family may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.
Benefits paid to your spouse will not decrease your retirement benefit. In fact, the value of the benefits they may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.” SSA.gov
There is no question that Social Security is an ingrained, vital safety net for more and more Americans. It’s not going away, there is nothing to replace it and unfortunately with the ongoing decline of pensions in the workplace Americans, in general, have demonstrated their inability or unwillingness to plan for their own financial future.
We are at a crossroad. As Social Security’s fiscal status declines we are faced with making it solvent beyond 2034. And then we are faced with a key question. Do we simply give up on individual responsibility and increase Social Security benefits to 60-70% of pre-retirement income and figure out how to pay for that? If so, you are clearly looking at payroll taxes in 20% to 25% range.