Social Security, the hidden issue
Do You Want to Pay 20% More Income Tax Forever When You Retire?
Choose to tax the rich CEO -or- the low-income seniors
Synopsis
Social Security is running out of money. Control of Congress will determine who gets taxed for it. The Dems and GOP have two radically different approaches.
- One taxes higher income workers on income not taxed now
- The other taxes retirees for the rest of their life unless they retire at age 70
Your Choice - Especially if voting in the Georgia Senate runoff race
The trustees project that all retirees will have their payments cut by 23% in 2034, about 12 years from now.
Summary
Today, people can normally retire at age 67 with full benefits, which vary based on total years worked and the amount paid in Social Security taxes. However, there is an upper limit. Payments are adjusted annually based on inflation.
In most cases, retirees will do ok if they have a few hundred thousand more dollars in savings. If they don’t, they may have trouble buying food and medicine, even if they have a paid-for house. I know many who work well into their 80s as part-time grocery baggers just to survive. A 23% cut in income would be devastating to most retirees.
Look at your own paycheck and imaging about a quarter of it suddenly gone, never to return.
Republicans
Prefer to cut costs.
The only way is to reduce payments to retirees who have already paid retirees, even though they have already paid the Social Security tax to receive those benefits. They plan to do this by raising the standard retirement age to 70.
I worked to age 70, but at a desk job that was not physically demanding. I was forced to retire from EDS (a subsidiary of GM) at age 65. I was lucky to find another employer, Argus Media, who would hire me at my regular job and allow me to work until I reached age 70. Few people are that lucky.
If the age is changed and a person retires at age 67, today’s retirement age, their income will be cut by 20% for the rest of their life.
That is a 20% tax on seniors.
Democrats
Prefer to raise additional revenue.
Currently, wages and salaries are taxed up to $147,000. Any money earned above that is not taxed. That limit will supposedly provide the maximum Social Security payment at retirement age.
They have proposed reinstating the tax starting at $400,000 with an untaxed gap in the middle. The richest workers, like NBA players and the CEO making a million dollars, would pay more into Social Security. However, I’m not sure why the gap exists and if it is necessary.
Some Democrats have also proposed changing the inflation adjustment calculation method. Theoretically, seniors have a lower inflation rate than workers since they don’t incur the costs of going to work and raising children. That may backfire, though, since it would include radically higher medical and assisted living costs.
There would be few if any, changes for seniors.
Your choice
Tax the rich or tax the poorest retirees, which most likely includes you.
References
- More details on the two proposals
- People not paying Social Security tax on all income
