Social Security Table » life

Social Security Helps Many Retirees Survive

admin — Mon, 16 Nov 2009 19:53:58 +0000

Eric Bayne asked:

The very first Social Security check was sent through the mail in 1940 even though President Roosevelt had signed the Social Security Act into law, 5 years earlier. Ever since, many American retirees have been grateful to receive that monthly financial safety net as they entered their retirement years. It’s difficult to believe that Social Security has been with us for sixty plus years.

In the original incarnation of the bill, Social Security benefits were only to be paid to the primary worker. But, before the bill went live, additional benefits for the spouse and children were added.

Quite a few folks erroneously think that the Social Security system is equivalent to an investment annuity, in which you send money to the government. They will then invest it and give you the resulting income in monthly payments for the rest of your life. In fact, however, the system is closer to a government welfare program. The collection of payroll taxes , which finances the Social Security program, is managed under the authorization of the Federal Insurance Contributions Act, better known as FICA. FICA is like the enforcement arm of the system. It ensures that every worker “contributes” his or her fair share to the government pool.

Each new generation of workers is responsible for taking care of the previous generation’s retirees. The amount of money you eventually get back from the government has only a tenuous relationship to the amount of money that was deducted from your check over the years. Since it’s inception, the system has collected from contributors and paid out over nine trillion dollars to recipients.

But the 1940 statute did not merely quit with allowing retirees to collect benefits. The law also consisted of the first incarnations of the welfare and unemployment systems which are still very much in evidence today.

Today, with millions of people losing their jobs every month, with our financial systems going into the toilet, and the housing crisis exploding around us – these safety nets are becoming more important than ever. Many retired women, especially, are just barely able to make ends meet with the help of Social Security. This is because, although gradually changing, women today are less likely than men to have additional sources of income. Partly due to working less years in the workforce because of child raising responsibilities. And partly because, even while in the work force, women typically are paid less than men.

But all families are helped by Social Security, even those that don’t need it to survive. In fact, according to independent studies, if Social Security was eliminated, many retired families would experience a drop in their living standards of 70% or more.

Many people fear that the system cannot sustain itself. In fact, there have been times in the past when the amount of money paid to recipients exceeded the amount of money collected via FICA. In these cases, Trust bonds were sold to make up the shortfall. Because of circumstances like these, Congress has occasionally upped the percentage of gross income that FICA can collect from salaries. Even these modifications, however, as the population ages and simultaneously live longer, may not be enough to sustain the system without drastic changes to the system.

The Social Security program is the largest government program of the country – constituting over twenty percent of the federal budget. As some politicians look at cutting the size and expenses of government, this program has an inviting target on its back. To many people, however, the cost of losing this critical system could ultimately be much more than the cost of running budget deficits.

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Reducing Taxes On Social Security – Advantages And Disadvantages Of This Debatable Issue

admin — Sat, 07 Nov 2009 23:06:31 +0000

Abhishek Agarwal asked:

The Social Security Act of 1935 is among the primary acts the United States government is imposing. The acts main function is to give a lifetime reward to workers who have retired by the age of 65. That was the time of the Midst of Depression and where programs regarding social security were then based on. Due to the expansion of these programs, the programs are considered to be a leading federal program. The funds for these programs demand almost a quarter of the funds in the federal.

For in a long time now, the payments given by the social security programs were free of tax. This was the setup since for the most part of the grantees life, the grantees were paying for their social security record.

In this case, change has always been a part of our life. Just like for programs in Social Secuirty, it has changed over the years and are still subject to change. Presently, a part of the payments given by the programs is taxable. There was one period where the benefits were almost taxed by 50% and other brackets even reached 85% taxable rate. Various measures were tried and employed in reducing the tax rates of the payments, however majority of them were futile. Due to the changes, it won’t be a surprise if there would come a year where people would pay the benefits of their social security at a very high rate. This could be partly attributed to increasing population. One important setback that is situation reflects is that because of the increasing population, some time in the future many people would become dependent on the social security programs especially the benefits when the time for their retirements comes. The setback could probably be best solved if the tax rates could be lessened by the government. In this way, there’s a higher probability that people would gain more income.

Another possible solution that could be taken as of the moment is to increase the rates of the taxes imposed on present employees. This way could somehow ensure that while there is an increasing population, the entire system would not necessarily fall apart. Presently, employees pay taxes after earning $ 90,000 firstly. The employees are still taxed similarly, since in this way the government is able to increase the cap rather than having the employees pay a higher percentage. In this way, the burden in placed on the higher bracket employees rather than those middle class ones.

One concern arising presently is that the social security and its benefits are now put at risk. There are retirees now enjoying benefits that people in the future would not be able to perhaps enjoy. Currently, it is determined that employees now would be getting 25% less of the benefits that retirees are enjoying presently. However retired grantees are also on the lookout to make sure that even with the booming population, taxes would be reduced so that we could avoid having people living underneath the poverty line.

Those who are currently working and paying for their benefits could be assured that in the long run they would be able to enjoy the benefits they are saving for now with additional savings for that matter. The present situation demands that the government find ways to reduce the taxes so as to avoid the conflict that the benefits enjoyed by the retirees presently would not be the same as to the retirees in the future. The changes could happen given that bad case social security programs are now encountering, it would perhaps be possible for the government to eventually lessen the taxes on these benefits and programs.

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When to Take Social Security

admin — Tue, 01 Sep 2009 21:22:45 +0000

Shelby Smith asked:

One of the most important retirement decisions facing most Americans is: WHEN TO START SOCIAL SECURITY BENEFITS. Conventional wisdom has always been “take it as early as possible — age 62″. Why? Several reasons are given: (a) it might not be there if you wait; (b) you can take the benefits and invest them and have more money later; (c) I might die early and never get a dime.

About three-fourths of Americans have heeded this advice and for most it was, or will prove to be, a big mistake. Why? There are several reasons: spousal benefits, higher benefits for delaying, penalties for starting early, penalties if you work while drawing benefits and are less than normal retirement age, and Social Security benefits get favorable income tax treatment.

Spousal benefits: If you qualify for Social Security benefits they will last the rest of your life — what’s more, if you’re married and your spouse is entitled to a lower amount, she/he will “step up” to the higher amount at your death. The spousal benefits say a spouse gets at least 50% (even if they paid zero into their Social Security account) of what the other spouse qualifies for AND the larger amount when the first spouse passes on. So by delaying your benefits your surviving spouse could get a bigger Social Security check every month for the rest of her/his life. Since “break-even” is about age 80 and joint life expectancy is closer to 90 for a married couple age 62, the odds of getting more are overwhelming. In fact, if Las Vegas gave the same odds you’d be booking reservations today.

For every year you delay taking Social Security benefits beyond age 62, your benefits grow between 7.5% and 8.0% annually PLUS a cost of living adjustment (COLA) based on inflation. In the past 30 years inflation has averaged over 3% annually…so your Social Security benefits will grow by over 10% a year. Where else can you get an investment backed by the U.S. Government and pay you over 10% annually? Stop looking, they don’t exist unless you want to take loads of risks. So if you are healthy, married and can afford to wait, postponing Social Security until age 70 will pay great dividends. Social Security will be there because with 50 million current getting benefits and another 76 million (the boomers) coming of age, politicians who vote to do away with Social Security will be unemployed.

If you start benefits at age 62 (the earliest time possible) you get about 25% less than if you wait until your normal retirement age (age 66 for most 62-year olds). This 25% less is for the rest of your life AND COLA is applied to a lower amount to compound the injury. Again, postponing make a great deal of sense.

If you start Social Security before normal retirement age and continue to work, your benefits will be reduced $1 for every $2 you make over about $13,000 annually. Yes, you’ll get this back later but when you consider taxes and the time value of money you’ll be worse off.

The big reason to delay is because Social Security benefits are taxed differently than other income: it is never 100% taxed and it is easy to manage the taxes on your Social Security benefits. PLUS, if taxes rise you’ll want to have as much of your retirement money in tax advantaged places (like larger SS benefits) as possible. Which way to you think income taxes are headed? Let’s see: record federal deficits, fighting terrorism, rebuilding our highways, bridges & infrastructures, an aging population, cleaning up the environment, etc. which must be financed by the federal government with income taxes. No doubt in my mind…how about you?

If you’d like to make sure you get Social Security right — and also take your qualified money (IRA, 401(k), 403(b), TSP, etc.) at the right time and use your other savings & investments wisely, I invite you to read my Guide to Social Security…and a Better Retirement by going to www.theretirementpros.com/eReport_Social_Security.php

You’ll have one chance to get Social Security right, so get all the info you can to make a good decision — most Americans haven’t and they’ll pay a lot more in taxes on their retirement money. Less money in retirement means less of a retirement. For more info on Retirement Planning, go to the Retirement Pros website at www.theretirementpros.com/

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Saving Social Security-The Future Of A Historical Piece Of Legislation

admin — Tue, 01 Sep 2009 16:02:52 +0000

G. White asked:

Social security and its future are one of the most controversial issues discussed in politics today, with many different views and outlooks taking center stage. The law that was designed by Franklin D. Roosevelt to protect the elderly and provide services and compensation to them in retirement finds itself in a completely different context today than it was seventy years ago.

Yet, change is nothing new-it is a daily occurrence that has affected social security before, and that will continue to affect social security in the future. Understanding both sides of the issue of social security is vital to ensuring a positive future for this country.

Briefings On The Beginning

The beginnings of social security can be traced back to the tragedy of the nineteen thirties-the Great Depression. It was passed as part of the New Deal, and was very controversial at the time because it was believed that it would lead to a loss of jobs. Yet, the program prevailed. Payroll taxes were first collected in 1937, and retirement benefits were paid that same year.

Changes Throughout The Years

The Social Security Act has proven to be a very flexible program, as it has been altered and changed several times over the years. This is not surprising when taking into consideration the dramatic changes that have occurred in the workforce since its original implementation. The act was expanded in 1939 to encompass farmers and to provide benefits to spouses. Medicare was added in the 1960s. More changes were made in the seventies and eighties. If it was changed in the past, what is stopping it from being changed to meet the needs of the future?

The Problem Of People

Currently, 163 million workers are earning Social Security protection, and Social Security provides benefits to about 50 million people. The future problems associated with Social Security revolve around changing demographics. While the average remaining life span of a 65 year old in 1935 was about 12 years, it is currently 18 years. This increase in average life span is one of the major factors contributing to the uncertainty of the future of Social Security.

Another factor is the retirement of the baby boomer’s. The fifties and early sixties saw a huge increase in reproduction, and it is these offspring who will be retiring beginning in the next several years. At the same time that Social Security will need to accommodate more retirees, the amount of people paying taxes on Social Security will decrease from 3.3 people per retiree today to 2.1 people per retiree in 2032. It is the combination of these problems that is causing the panic regarding Social Security’s future.

Solving The Problem

There are many solutions being discussed regarding the Social Security program, and each of them would mean a trade off for Americans. Two of the solutions are somewhat obvious: increase the payroll tax, and decrease the amount of services provided to beneficiaries. These solutions would have obvious ramifications, and might only cause more problems for the future of Social Security than they would solve.

Another possible solution is to allow for early investment in Social Security in the form of a “pre funding” voluntary Social Security savings account. Although workers are currently unable to contribute to their Social Security funds before they retire, this proposal would allow them to do so. Critics say this plan would be expensive to manage, and it would be risky for beneficiaries as well.

A Middle Ground

Just as with any important issue, it would be nearly impossible to find a solution that would please everyone. Yet, the past of Social Security gives some hope for its future. If Social Security was fluid enough to be changed in the past, then we can have faith that it will be strong enough to handle any future changes.

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