As someone who has been around the retirement industry for 20+ years, I have zero faith in most people saving for retirement unless they are forced to save. Right now, social security is it. The majority of people can't be fiscally responsible at a young age, which is key to retirement savings. Auto enrollment has helped a lot but there is still issues with people using their 401k as a non retirement slush fund.
Retirement Targets
- Thread starter yowza
- Start date
Yeah I understand but on a gut level I just don’t like the means testing of retirees and would prefer raising the cap on incomes taxed for SS.
I think just raising the cap might be enough to solve the problem, since higher earners already put far more into the system than they get out in benefits (we’ve been through this in a previous discussion - SS benefits are already structured to be progressive)
Also, means testing pretty directly disincentivizes saving
The concept of time when you are say 22 just seems so far into the future. You have all the time in the world.
All the bombardment from social media and tv and from friends who do the YOLO stuff.
And the earnings subject to tax today are capped. I plan on uncapping the benefits when the earnings taxed are uncapped.
The solution will pretty much solve SS problems. Algorithm used to determine benefits is progressive. Or everyone can give up 36 monthly SS checks. Do you want to give up 36 monthly SS checks so the super wealthy can continue to avoid the tax above the present threshold………which they will get benefits for?
Visualizing the Pyramid of Global Wealth Distribution
Global wealth stands at over $454 trillion. This graphic shows how it's distributed, by various levels of net worth.
www.visualcapitalist.com
The Distribution of Global Wealth
Worldwide net private wealth stood at $454.4 trillion in 2022.Here’s how it was distributed across various levels of net worth, which takes a person’s financial and real assets such as housing, and subtracts their debt:
| Net Worth | Number of Adults | Share of Adults | Total Wealth | Share of Global Wealth |
|---|---|---|---|---|
| More than $1 million | 59.4M | 1.1% | $208.3T | 45.8% |
| $100,000 to $1 million | 642.0M | 12.0% | $178.9T | 39.4% |
| $10,000 to $100,000 | 1.8B | 34.4% | $61.9T | 13.6% |
| Less than $10,000 | 2.8B | 52.5% | $5.3T | 1.2% |
The highest wealth rung controls $208.3 trillion in wealth, or 45.8% of the global total. Just 1.1% of the world adult population fall in this bracket.
Those with $100,000 to $1 million have the next greatest share, at 39.4% of net household wealth.
We can see that wealth ownership begins to decline dramatically in the next bracket. People with $10,000 to $100,000 control just 13.6% of global wealth. However, the number of people in the global middle class have more than doubled over the last two decades, driven by the rapid expansion of China.
I'm not saying that something shouldn't be done or the amount raised. I just don't think that anyone has actually ran the numbers to see how well it would work with no caps on the benefits. If you have those stats, I'd love to see it.
Here is an article discussing it. You should try Google.
From the article:
In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle- and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according a new analysis from the left-leaning Center for Economic and Policy Research.
"If you make over that cap, like 6% of the population does, you could be paying 1% of your income or even less than that," noted Sarah Rawlins, program associate at CEPR.
Yet a middle-income worker earning less than the $160,200 cap in 2023 will pay an effective tax rate that is six times higher than the millionaire's tax burden, she noted.
One way to fix Social Security? "Smash the cap"
Eliminating or lifting the tax cap would help stabilize Social Security, while also being fairer to most Americans, experts say.
www.cbsnews.com
As a fed employee SS is part of my retirement equation and by extension every congress critter when civil service pensions went away. So no congress critter is going to jump for reduction of SS benefits particularly the lesser known short timers. There are a handful that it wouldn’t matter.
The devil is in the details.....Here is an article discussing it. You should try Google.
From the article:
In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle- and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according a new analysis from the left-leaning Center for Economic and Policy Research.
"If you make over that cap, like 6% of the population does, you could be paying 1% of your income or even less than that," noted Sarah Rawlins, program associate at CEPR.
Yet a middle-income worker earning less than the $160,200 cap in 2023 will pay an effective tax rate that is six times higher than the millionaire's tax burden, she noted.
One way to fix Social Security? "Smash the cap"
Eliminating or lifting the tax cap would help stabilize Social Security, while also being fairer to most Americans, experts say.
"Sections 6 and 7. Apply the combined OASDI payroll tax rate on earnings above $250,000,
effective for 2024 and later. Tax all earnings once the current-law taxable maximum exceeds
$250,000. Do not credit the additional taxed earnings for benefit purposes."
I don’t know that this would work exactly, but I don’t mind the general direction you are going in. Don’t they know how much a person has in tax deferred accounts (to calculate your required minimum distribution)? I would say use that as your calculus. If someone is above a certain threshold, begin a phaseout until you get nothing. I’d even support a credit for charitable contributions (so that if you were above the threshold but are generous, you still qualify). I like it as essentially an assist for the lower income folks and a backstop for anyone else (in case they run into major medical issues or whatever).
Several options have been discussed. Including the one that gives full benefits. We need to raise the cap on earnings. And stock options should be taxed as well.
You are not using life expectancy correctly though. If it was 63 then because lots of children were dying (polio, measles, etc.) it is a meaningless number as far as social security goes. What would actually be useful is maybe the life expectancy of a 40 year old then and now as they would be moving into their peak earning years. If a 40 year old's life expectancy was say, 70 then and 80 now, that would be a lot longer to be collecting benefits. My guess is the difference isn't nearly that much though.
When you find the study where they actually include full benefits, I'd love to see that. The one they reference in this article as well as Bernie's doesn't, and that's a really big deal with the bottom line.
At my age and income level, i'd love to see this done but like most things in Washington, the fine print isn't brought up.
Many proposals out there. I’ll Google it.
And if we do cap benefits that Is preferable to making everyone else lose 36 monthly SS checks just because a super rich guy doesn’t care about the average person.
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OK, I have to call out the bolded as highly and deliberately misleading.Here is an article discussing it. You should try Google.
From the article:
In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle- and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according a new analysis from the left-leaning Center for Economic and Policy Research.
"If you make over that cap, like 6% of the population does, you could be paying 1% of your income or even less than that," noted Sarah Rawlins, program associate at CEPR.
Yet a middle-income worker earning less than the $160,200 cap in 2023 will pay an effective tax rate that is six times higher than the millionaire's tax burden, she noted.
One way to fix Social Security? "Smash the cap"
Eliminating or lifting the tax cap would help stabilize Social Security, while also being fairer to most Americans, experts say.
First it's 6% are over the cap - that includes people making $160,500. But to pay 1% of your income as FICA, you would need to make 6 times the cap, i.e. 960k annually in WAGES. Not cap gains, not interest/dividends, not gambling winnings- WAGES. That's a hell of a "could" caveat in that sentence.
Then the second bolded turns that into a "will pay 6 times higher" and that is total BS. Highly misleading, not cool by the author.
Sorry, number nerd, can't help myself.
Does not deflect from the fact that the millionaire wage earner pays a lower marginal rate of tax than a middle income worker.
Eliminate the cap on all earned wages for SS tax.
You can’t create a system that disincentivizes savings. It will have a massive negative impact on the stock market and likely lead to worse inflation than we just saw the last 3 years. Double digit interest rates will follow.
For a two person household who worked 120 quarter each, the minimum amount they would get is roughly 2125 per month.
So are you saying that the current SS deincentivizes saving?
No. Just eliminate SS earnings cap. Completely. Start taxing stock options for SS. Middle Class prefers this option versus losing 36 monthly SS checks. Why do you want people to suffer to give the wealthy tax breaks?
