by tovarichpeter ➕follow (6) 💰tip ignore
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As it stands, workers get 90 percent of the first $10,700 of their average pay. They get 32 percent of the next $50,100, and 15 percent of their average wage above this amount up to the maximum. If the formula were changed to give workers 100 percent of the first $10,700 of their average pay it would amount to an 11 percent increase in benefits
From the article:As it stands, workers get 90 percent of the first $10,700 of their average pay. They get 32 percent of the next $50,100, and 15 percent of their average wage above this amount up to the maximum. If the formula were changed to give workers 100 percent of the first $10,700 of their average pay it would amount to an 11 percent increase in benefits
A worker with average pay of $20k receives 90%*10700 + 32%*9300 = $12606. That's 63% of their usual working pay.
A worker with average pay of $100k receives 90%*10700 + 32%*39400 + 15%*50000 = $29738. That's 30% of their usual working pay.
So, really, the high-income workers are the ones getting screwed by social security.
So, really, the high-income workers are the ones getting screwed by social security.
There are the clawbacks, too, because Social Security becomes 50 percent, then 85 percent taxable at certain income thresholds. If you had the common sense and restraint to garner your own retirement savings, SS punishes you with higher taxes.
Actually I think you made a mistake on the $100,000 earner calculation. Should be:
A worker with average pay of $100k receives 90% of first $10,700 + 32% of next $50,100 + 15% of next $39,200= $31,542. Not much of a difference from your example, but a difference nonetheless.
This why some did the Roth IRA bit. Forgo the tax deduction on the contributions, but tax free on withdrawal. Not sure if Roth withdrawals count toward making SS taxable, though.
The problem with Roth is stupidly low income limits they put on it. I can't do it anymore, because my income is above the limit.
I never put any money into Roth. To me it makes no sense to give the IRS/gummint my tax money early.
. I may die earlier than expected or have life changes that require money to solve. Better have the money than give it to the IRS.
4. I feel I can invest it better with the money today and generate more than enough to cover future taxes tax obligations from simple IRA.
5. Study after study show that as one gets to 70's and above, discretionary spending tamps down. I'd rather have my money now so I can do thing I like than later when I may not be able to due to health or just old age.
However, I went through the Monte Carlo estimates about paying tax now vs. playing the margins on paying less tax after retirement a while ago and the break even points were at the point where you would be quite the old crock before realizing any significant financial benefits. Old and creaky but marginally richer IF the taxation margins AND investment margins worked out in your favor.
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