Here it comes: Paying more into Social Security than you can reasonably expect to get out of it.

beavith1 2012/08/08 14:09:49
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People retiring today are part of the first generation of workers who
have paid more in Social Security taxes during their careers than they
will receive in benefits after they retire. It's a historic shift that
will only get worse for future retirees, according to an analysis by The
Associated Press.

Previous generations got a much better bargain, mainly because
payroll taxes were very low when Social Security was enacted in the
1930s and remained so for decades.

"For the early generations, it was an incredibly good deal," said
Andrew Biggs, a former deputy Social Security commissioner who is now a
scholar at the American Enterprise Institute. "The government gave you
free money and getting free money is popular."

If you retired in 1960, you could expect to get back seven times more
in benefits than you paid in Social Security taxes, and more if you
were a low-income worker, as long you made it to age 78 for men and 81
for women.

As recently as 1985, workers at every income level could retire and
expect to get more in benefits than they paid in Social Security taxes,
though they didn't do quite as well as their parents and grandparents.

Not anymore.

A married couple retiring last year, after both spouses earned
average lifetime wages, paid about $598,000 in Social Security taxes
during their careers. They can expect to collect about $556,000 in
benefits if the man lives to 82 and the woman lives to 85, according to a
2011 study by the Urban Institute, a Washington think tank.

Social Security benefits are progressive, so most low-income workers
retiring today still will get slightly more in benefits than they paid
in taxes. Most high-income workers started getting less in benefits than
they paid in taxes in the 1990s, according to data from the Social
Security Administration.

The shift among middle-income workers is happening just as millions
of baby boomers are reaching retirement, leaving relatively fewer
workers behind to pay into the system. It's coming at a critical time
for Social Security, the federal government's largest program.

The trustees who oversee Social Security say its funds, which have
been built up over the past 30 years with surplus payroll taxes, will
run dry in 2033 unless Congress acts. At that point, payroll taxes would
provide enough revenue each year to pay about 75 percent of benefits.

To cover the shortfall, future retirees probably will have to pay
higher taxes while they are working, accept lower benefits after they
retire, or some combination of both.

"Future generations are going to do worse because either they are
going to get fewer benefits or they are going to pay higher taxes," said
Eugene Steuerle, a former Treasury official who has studied the issue
as a fellow at the Urban Institute.

How can you get a better return on your Social Security taxes?

Live longer. Benefit estimates are based on life expectancy. For
those turning 65 this year, Social Security expects women to live 20
more years and men to live 17.8 more.

But returns alone don't fully explain the value of Social Security,
which has features that aren't available in typical private-sector
retirement plans, said David Certner, legislative policy director for

Spouses can get benefits even if they never earned wages. Children
can get benefits if they have a working parent who dies. People who are
too disabled to work can get benefits for life.

Because of spousal benefits, most married couples with only one wage
earner will continue to get more in benefits than they pay in taxes for
the foreseeable future.

"You are buying this lifetime inflation-protected benefit that you
can never run out of and that will always be there for you," Certner
said. "It protects your spouse, protects your family and protects you
from disability."

Certner noted that private pensions, retirement savings and home
values took a big hit when the economy collapsed, putting a dent in the
retirement plans of many Americans.

"When you have that combination of factors, Social Security becomes
more and more important," Certner said. Social Security is financed by a
12.4 percent tax on wages. Workers pay half and their employers pay the
other half. Self-employed workers pay the full 12.4 percent.

"When you have that combination of factors, Social Security becomes
more and more important," Certner said. Social Security is financed by a
12.4 percent tax on wages. Workers pay half and their employers pay the
other half. Self-employed workers pay the full 12.4 percent.

The tax is applied to the first $110,100 of a worker's wages, a level
that increases each year with inflation. For 2011 and 2012, the tax
rate for employees was reduced to 4.2 percent, but is scheduled to
return to 6.2 percent in January.

The payroll tax rate was only 2 percent in 1937, the first year
Social Security taxes were levied. It didn't surpass 6 percent until

Even with low tax rates, Social Security could afford to pay benefits
in the early years because there were more workers paying the tax for
each person receiving benefits than there are today. In 1960, there were
4.9 workers paying Social Security taxes for each person getting
benefits. Today, there are about 2.8 workers for each beneficiary, a
ratio that will drop to 1.9 workers by 2035, according to projections by
the Congressional Budget Office.

About 56 million people now collect Social Security benefits, a
number that is projected to grow to 91 million in 2035. Monthly benefits
average $1,235 for retired workers and $1,111 for disabled workers.
Social Security provides most older Americans a majority of their
income. About one-quarter of married couples and just under half of
single retirees rely on Social Security for 90 percent or more of their
income, according to the Social Security Administration.

"Social Security is what's carrying me," said Neta Homier, a
79-year-old retired hospital worker from Toledo, Ohio. "There's no way I
would have made it without it. The kids, they're on their own now, and
I'm not going to be a burden for them. That's what it would have been if
I hadn't had Social Security."

Homier said she started receiving Social Security when she was 63 and
now gets about $800 a month, after her Medicare premiums are deducted.
She said her father died at 51, so he never received Social Security,
and her mother died at 71 and collected benefits for only a few years.

"It's definitely worth it," she said.

At 52, Anthony Riley of Columbus, Ohio, has a different perspective.
Riley said he has a private retirement account because he worries that
Social Security won't provide adequate benefits throughout his

"I used to think that it was worth paying for your Social Security,
but now I don't think so," Riley said. At 22, Mackenzie Millan of Los
Angeles has even greater doubts about whether Social Security will be a
good deal for her.

"The money that I put aside now, it's not like that money is going to
be waiting for me. That money is going toward someone else," the recent
college graduate said. "If I wanted Social Security 50 years from now,
when I wanted to retire, I would have to hope that someone else is still
working and putting money aside in their paychecks to pay for my Social
Security at that point."

Read More: http://www.foxnews.com/politics/2012/08/07/new-ret...

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  • TheTruth1313 2012/08/08 19:52:54 (edited)
  • Bob DiN 2012/08/08 17:38:41
    Other comment
    Bob DiN
    This is nothing new as Soclal Securty was a Ponzi Scheme from the start. When FDR signed into law in 1933 retirement age was 65 with no 62 option. The life expentency at time was 59. At least back then it was not manditary to join.
  • beavith1 Bob DiN 2012/08/10 05:41:21
    it wasn't a Ponzi scheme back then. it was an insurance system, stacked against the insured. you collected from two and wound up paying for one.

    it became a Ponzi scheme when the benefits paid to the early entry folks became more than the later folks that entered.

    i'm 52 and i'm sure that i won't see a dime of that hundred K +that i've paid in...
  • Bob DiN beavith1 2012/08/10 05:54:21
    Bob DiN
    Trust me it started as a Ponzi scheme.

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