Social security

[WanderingRose]

You joke but there are those on the right who want it to happen. Not shooting them, but withholding care.

I believe withholding care is happening, and has been for years.

Not going to try to spark a debate about that, but this is my informed opinion.

If you’ve followed articles the last year or two about the withholding of Paxlovid from millions with Covid, when it could have saved lives, that is part of this long standing practice.

 

[rockloper]

The U.S.A. is NOT a Democracy! Here's a 3 min you tube that explains it!
Why the U S is a constitutional republic - not a democracy

Whatever you call it, I don't want to lose it to maga

 

[rockloper]

I see a problem with just doing that and nothing else. Social security currently has a surplus of funds because of all of the funding done by the baby boomers. Far more people were paying payroll taxes into SS than drawing from it. That isn’t the case any more. And now the number of people drawing SS is much larger as the baby boomers are drawing SS.

Also there was a significant inflationary period during the baby boomers were paying payroll taxes into SS. That means the value of the dollar being paid to the boomers is not nearly as valuable as the dollar that the boomer paid into SS. To compensate the boomer gets more dollars from SS than would have been the case when he was funding SS.

To make matters worse, the excess SS money coming in is ‘invested’ in government bonds, and those bonds are not keeping up with current inflation. That means that the longer a dollar remains in the SS fund, the less real value it has. So unless the fund is invested in something which has a better return than inflation, it will continue to shrink in value.

And then there’s the problem of just how much would not having a SS cap bring in. Currently the cap is $147K. The median individual annual salary is $54,860 and the average $59,384. That means the cap is almost three times the median salary. All of this means that simply removing the cap would not really bring in that much more funding. Some, but doubtful that it would bring in enough to make up the decline in the fund.

Also don’t forget that there is a big difference between salary, which funds SS, and wealth, which does not. The income of the really wealthy folks is not from a salary, but from growth of existing assets and grants such as options. Neither of these fund SS as they are capital gains and not salary.

Would you feel better if I worded it "Contribute on every dollar reported as income"?

 

[rockloper]

Yes, but not just the wealthiest. Consider the farmer. He is not employed by anyone and receives no salary. He initially pumped what funds he had into his land and from year to year lives in debt from the time he plants seeds until he sells his crops. He might have some chickens, maybe a garden, and maybe some cattle. He gets most of his food from those. When he sells his crops, the bulk of the money goes back into the farm. He pays off the debt from last year’s seeds and maybe takes a small percentage for items he can’t produce on his farm.

It’s only when he sells his farm that he makes any real money.

A similar scenario exists for most self-employed folks. They tend to make their real money from when they sell their business.

But that’s not a salary - it’s capital gains.

For the most part you're describing a homesteader, not today's corporate farmer. Even the smallest businesses have a model whereby they pay themselves a salary, otherwise they're just 'moonlighting'. Revamp the laws for 'legit' business expenses.

 

[Gr8ful]

Whatever you call it, I don't want to lose it to maga

Why don't you want America to be Great?

 

[rockloper]

Why don't you want America to be Great?

I do want America to be great, just as I do the rest of the world.

 

[mpruet]

Would you feel better if I worded it "Contribute on every dollar reported as income"?

It is already.

 

[rockloper]

It is already.

Hardly, otherwise there wouldn't be a cap.

 

[mpruet]

Hardly, otherwise there wouldn't be a cap.

Guess you never got a 1099-B form. Trust me, capital gains are included on the federal income tax form and becomes part of your AGI. Exercise of options are included as well. Also 1099-Div for dividends and 1099-INT for interest earnings are included as part of your AGI. And these are all not only sent to the individual, but also to the IRS. And when your 1040 is received by the IRS a cross-check is made to make sure that you included them on your tax forms. If you leave one out, you get a notice from the IRS of the discrepancy and then you get audited.

Been there, done that.

As a retired person, the majority of my tax preparation time is spent applying these, and they are most certainly included as a part of my AGI (Adjusted Gross Income). And yes, I pay income tax on them.

 

[camperdan]

Whatever you call it, it is not germane to the central issue. It is broken, with career politicians, focus on power,
[personal wealth building, and dissing the other party at every chance. Term limits would be a good start on
a return to the idea of citizen legislators, who are actually working FOR the people.

So, why waste brain cells bickering? Do something useful with the good mind you have.

 

[bullfrog !]

^^^discussion is important as it encourages you to make an individual decision and encourages you to do something like vote by getting you involved. There are lots of things that need to be tried to solve the problems but our main tool is informed voting.

 

[mpruet]

^^^^
Crooked politicians are elected by the people. So the people get what they wanted.

 

[RonDean]

I do want America to be great, just as I do the rest of the world.

I think America is already pretty good. In some ways BETTER than whatever time some people seem to think it WAS great. Ask anyone subjected to segregation, redlining, and any of the more regressive discrimination practices of the past. It's now better than during the time of Robber Barons, Child Labor, and the Great Depression. Better than during the Vietnam War, Slavery, and the Trail of Tears. I could go on, but I'll simply ask exactly "WHEN" does anyone think it was great?" I'll bet there were a great many people from that time who would take exception to the term.

It could be better, and I hope it will be. Although in exactly what way will depend on who we might ask. But to suggest what the maga term does is to show a lack of historical knowledge or an attitude of it only matters how it seems to ME. And anything more I might add to that about maga would probably be deemed "too political."

On the social security front, it is good news that in 2024 the cap will increase from $160,200 to $168,600. Although trying to live in San Francisco or New York that amount is almost the poverty line and is a ridiculously low number. Maybe if we set the cap at 1 million or removed the cap entirely, social security benefits would not be at risk.

 

[Gr8ful]

Guess you never got a 1099-B form. Trust me, capital gains are included on the federal income tax form and becomes part of your AGI. Exercise of options are included as well. Also 1099-Div for dividends and 1099-INT for interest earnings are included as part of your AGI. And these are all not only sent to the individual, but also to the IRS. And when your 1040 is received by the IRS a cross-check is made to make sure that you included them on your tax forms. If you leave one out, you get a notice from the IRS of the discrepancy and then you get audited.

Been there, done that.

As a retired person, the majority of my tax preparation time is spent applying these, and they are most certainly included as a part of my AGI (Adjusted Gross Income). And yes, I pay income tax on them.

Income from rent, certain types of royalties, capital gains and dividends are not subject to FICA taxes. FICA taxes are paid on all earned income (up to the $168,600 wage base mentioned earlier). When you add the medicare tax workers & employees pay 15.3% total for retirement.

 

[mpruet]

I recently read an interesting book - “Ours Was the Shining Future” by David Leonhardt. One of the key points that he makes is how conservatism and liberalism is divided between fiscal and cultural. As an example, most of the MAGA folks are conservative culturally, but also fairly liberal fiscally. Another is how businesses tend to be mostly liberal culturally, but not so much fiscally.

For instance, many if not most, of the MAGA folks are anti-abortion, but still take advantage of government services. And most businesses like large immigration (a typically liberal viewpoint) because that tends to keep salaries low. It becomes difficult to know what a ‘Liberal’ or a ‘Conservative’ is.

In talking about the Democrats, he correctly points out that one of the major issues that they have is that they have tended to emphasize an ‘cultural liberalism’ of the west coast rather than ’financial liberalism’. This has caused them to lose a lot of support in much of the central/south USA, including in groups which historically were Democrats. The voters in central/south USA tend to be far more influenced by cultural issues than fiscal. So we have folks like Trump who understand the mentality of those folks, and who are not at all upset by the fiscal policies that were done and which actually hurt their local economy.

It’s a strange world we live in, Charlie Brown!

 

[mpruet]

Income from rent, certain types of royalties, capital gains and dividends are not subject to FICA taxes. FICA taxes are paid on all earned income (up to the $168,600 wage base mentioned earlier). When you add the medicare tax workers & employees pay 15.3% total for retirement.

My point exactly. And to make it even more interesting, most financial advisers would be thrilled if their clients invested 15% of their earnings.

 

[rockloper]

Income from rent, certain types of royalties, capital gains and dividends are not subject to FICA taxes. FICA taxes are paid on all earned income (up to the $168,600 wage base mentioned earlier). When you add the medicare tax workers & employees pay 15.3% total for retirement.

Let's see what mpruet has to say in reponse!

 

[dhuff]

^^^^
Crooked politicians are elected by the people. So the people get what they wanted.

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." ---H.L. Mencken

 

[Gr8ful]

Let's see what mpruet has to say in reponse!

He already replied in the post right above yours post #456 10 hrs ago.

 

[mpruet]

He already replied in the post right above yours post #456 10 hrs ago.

Well to explain more as well as why I prefer investing to how SS is run… (Bet you didn’t think I’d go there again…) ;-)

The individual median salary in the USA is currently $44,225 annually and 13.3% goes to SS and Medicare. But let’s see what the projection would be if that 13.3% went into an S&P index fund instead. Also since the index fund is highly diversified, we don’t have to worry about market fluctuations so can just put the money in and forget about it until retirement.

Inflation is real, but we can ignore it for now since we don’t know what it will be in the future. We’ll pretend that it doesn’t exist. That way we can compare the retirement dollars with current value. Also we’ll pretend that you never get a pay raise and remain at the median salary.

OK - historically over time the S&P500 has had an annual growth rate close to 10% annually, but we’ll be more conservative and go with an 8% annual growth.

Currently about 13.3% of the salary goes to SS and medicare (for the median salary that’s $6766/year), but suppose it went into the fund. At an annual growth rate of 8%, after 30 years, the fund would have a value of $766,522 and after 40 years of only making the median income, you’d have $1,752,887 for retirement. (Yes - the magic of compounding!).

Using the 4% rule you’d be able to safely withdraw $30,666/year or $2,555/month if you quit work after 30 years. If you started work at 20, that would be retiring at 50. Since you only withdrew 4% and the historical growth is at 8% the fund would continue to grow even though you had withdrawn. Also the money would only be taxed as long term capital gains, not ordinary income.

But if you kept working until 60 that would be 40 years of working at the median salary, you’d be getting $70,115/year or $5842/month - still using the 4% rule. Yep, you’d be getting almost double what you were earning while working.