Social Security

The 15-20% is based on your expendable income (i.e. post witholding for income, Medicare and Social Security taxes) not your gross income.

Social Security and Medicare are 7.5% (6.0% for SS, 1.5% for Medicare) of gross income for the employee portion. Self employed people pay the employer's share as well which bumps their contribution to 15%.

15-20% of expendable income probably equates to 10-15% of gross income for most of us (those with an effective tax rate in the high teens) so if you wanted to include Social Security payemts into the mix you'd be looking at a total of 17%-23% of gross income for most people and 20%-25% of gross income for the self-employed.

i appolige i got my numbers wrong, but i still have too many bills to put away 15% to 20% (expenddable)

Yes and when your spouse is self employed and you work for a non-profit place, social security (as well as all of the other taxes that we have to pay) eats up a lot of both of your incomes. I guess the government doesn't want me to have any money but the crack addict with 3 babies gets as much as they can give her every month.

My household is certainly not among the wealthy--currently may not even be in the median--but we pay our bills and our taxes and manage to put back a little for a rainy day.

Not long ago I sat down and added up all the taxes we pay and they totaled roughly 50% of our combined incomes, and, being self employed, Social Security is a sizable chunk of it. My social security check, however, will just about cover the house payment and utilities, and that's it. Social Security taxes held by the government don't grow; in fact they usually are borrowed against for other things and all that is sitting in our accounts are government I.O.U.s (That doesn't worry me--if the government goes broke, money will be meaningless anyway.)

It's pretty much too late for me to benefit now, but you young people should be yelling and screaming and demanding that your representatives get off the dime and give you the option to invest some of your Social Security contributions with the understanding that as they grow, so does your retirement benefit.

To soothe the critics that don't trust people to competently manage their own destinies, make it optional for people to stay with the old system or go with a new one.

Currently it is the Democrats in Washington who are most resisting this, but their minds can be changed in the face of overwhelming public opinion.

By the time you receive social security, You are presumed to have your mortgage paid off, I guess, and require a lower standard of living.
It may not be the best plan, but it was put up for a good reason and it should continue. I have done pretty well with my 401K, as I still have every cent put in and then some, but who knows if it will keep doing so well? I guess I chose my investments wisely (surprisingly, as I'm not a person who knows much about these things), but there are a lot of people who aren't very bright and could end up screwing themselves or getting screwed by unscrupulous brokers.
Then of course there are people who just won't (sometimes can't) save, and we're not going to let them go hungry when they're old, anyway.
Does SSDI funding come out of the same pot? If so, perhaps this is where it all began to go astray.
From my part-time second job, this week I paid $50.45 federal and $28.64 Social security. I don't know if the federal includes the withholding I just added, though. If not, that means I paid over half for SS what I paid for federal. The federal govt still gets the largest chunk. (and try as i might, I don't get much of a say in how they spend that, either).
Yes, Saintsfan, I'm saying if you don't need it, don't take it. Consider it an investment in your country. I'm saying in particular, if you are rich, not just comfortable. I realize that's just my opinion and the way I am, you are not bound by it. But if I didn't need it, I sure wouldn't take it. I wouldn't need it and would consider it an investment. I won't get money back but I'll get satisfaction. If it takes nothing from me that I can't give, I am an altruist all the way! :wink:

It's interesting to see how people conclude they are unable to save for their retirement, because they pay too much in rent and other living expenses. What we did was to make sure that our occupancy and living costs when we worked allowed for us to save 15 to 20 percent of our income. It's called taking responsibility for your own future welfare. I don't understand it, but it seems very common in this country (and elsewhere).

SSDI does come out of the same pot of money but you could probably find several thousand tiny steps that got SS as a whole to where it is today. All of them probably seemed like a good idea. But no one ever changed the basics of how the system is funded and the swelling numbers of people that will be hitting retirement age soon is forcing some rethinking on the basics. Obviuosly, a system where more people collect than pay in can't survive forever.

One of the biggest changes in the social security system was when created, benefits started at age 65 when most people didn't live much past 65. Many people now live into the late seventies, but the benefit eligibility age increased by only a couple of years. The secondary problem is the added beneficiaries to the social security pot that now includes immigrants, the disabled, spouses, and some others that escapes me for the moment. Can't keep expanding the program without increasing taxes or reducing benefits. A six year old can tell you that he can't buy a candy bar for .05c any more - and the size of candy bars have been getting smaller and smaller while the price keeps increasing.

This is sort of a side bar to this issue on social security, but I got into Google to attempt a find something on price and size of candies. Instead, I found this link on candy that most people should find interesting - especially us old fogies. http://www.gti.net/mocolib1/kid/foodcandy.html

Maybe it's a generational thing? I dunno.

When I got my first job (fixing vacum cleaners) at 16 years old the guy that ran the company pulled me aside when he gave me my first paycheck and asked me what I was going to do with it. I, of course, planned on blowing it on junk (what else would a 16 year old do? ). He convinced me to buy one $50 Savings Bond every month and told me that every time I ever got a pay raise I should invest half of the raise.

I've always followed that advice and so far it's worked pretty well. If you don't see the money you learn to live within the confines of what you have. Some people run into major life problems that end up draining them but many just never learn to save and it seems to get harder to get started the older you get.

No offense, guys, But isn't it true that the cost of living vs the real earnings index is not what it used to be? Granted, many people today live beyond their means, but still others have to work 2 jobs just to meet the basic food and shelter needs of their families. When you guys were younger, you could get more for the same money than we get now in America. Even without luxuries, few familes could afford a to buy a home and a car with just one wage-earner, which used to be the norm. Everything takes a much bigger percentage of earnings, and inflation has been ridiculous in the past decades. I would suggest that you don't label those who are unable to do what you were able to do as simply spendthrifts, it isn't fair.
When I was small, my parents bought a house that cost (brand new) just $1000 more than my father's income, and he was a self-employed laborer. That doesn't happen anymore. Average Joes don't earn in a year what new a house costs anymore!

I did find some pretty interesting info/opinions about social security:
First: In 2003, the average monthly retirement benefit was $895. That's less than $11,000 a year.
Question: How much does the average earner contribute in a year?
I also found this: SSI is a program paid for through general tax revenues-- not through Social Security trust funds. SSI disability benefits are paid to people who have a disability and who don't own much or have a lot of income.
Generally, out of every dollar paid in Social Security and Medicare taxes:

69 cents goes to a trust fund that pays retirement and survivors benefits;
19 cents goes to a trust fund that pays Medicare benefits; and
12 cents goes to a trust fund that pays disability benefits.
The more you put in, the more you get back: The benefit amounts above are based on steady lifetime earnings from age 22 through the year before retirement (2000). For 2000, these earnings are estimated to be approximately $14,300 for a low earner; $31,900 for an average earner; $76,200 or above for a maximum earner. Married workers can receive benefits based either on their own work record or their spouse's, whichever is higher.
Here's one man's solution: Social Security as a Source of Space Funding!
http://www.wordedge.org/200005/spacefunding.html

This is interesting:
A story, then a debate:
"Today, the payroll tax applies only to earnings up to $87,000. If you phase in a removal of this cap beginning in 2018 and make the payroll tax into a flat tax, revenues increase by 2.13 percentage points.

Under current law, you can retire at age 62, 65, or 67 (the longer you wait, the higher your benefits). If you phase in a change to 65, 67, and 70, costs are reduced by .59 percentage points.

Means testing, which reduces retirement benefits for high earners, reduces costs by 1.65 percentage points.

These three reforms pretty much fix the problem. "Pretty much" because there's too much uncertainty in long-term financial estimates to allow us to solve this problem with perfect precision 50 years in the future."
http://www.calpundit.com/archives/003484.html

Interesting point here:
"Institute means-testing, such as 1/2 down for every dollar earned above the national median income. Unfair? Not at all, since the whole purpose of SS (even as stated in so many words by FDR) was old-age income *insurance*, which by definition pays upon meeting the covered condition or loss."And here: "(Why don't more of you guys who whine about some of us subsidizing others, care about real working earners subsidizing speculators (capital gains) at the same income level, or single people subsidizing not only public education but direct payout as deductions? (I don't want to do both!)"
And here:"There are some things that SS pays for that should be coming out of general revenue: disability and survivors benefits."
Who would benefit by adoption of a privatized system? A system which mandates the flow of 10% of the nation's payroll annually into the stock and bond markets would be a bonanza for financial businesses and advertising firms. This is money which would otherwise go directly out to beneficiaries, or be left in the hands of the workers who had earned it. The ceaseless churning of these funds over a 30-year average holding period would make for enormous profits for the finance industry. Wealthy families who already have large holdings in equities would stand to gain from the stock price inflation likely to occur during the build-up period. Low and middle income families, lacking the best advice, often driven by fear or false expectations and without the resources to ride out market fluctuations, would be put at great risk. Even "playing it safe" risks serious losses due to inflation. http://www.themadisoninstitute.org/SSTheCaseFor.html
Options For Social Security Reform: http://www.ncpa.org/pi/congress/pd060799a.html

suzy, All good points, I'm sure. Just need to read it more slowly to absorb the important points made. Back later. c.i.

It's simply the world's longest-running Ponzi scheme. I don't expect to see a dime.

Umm.. No offense Suzy but if I recall correctly you are 2 or 3 years older than I am.

This statement right here covers the biggest reason why SS (as it curently sits) is a broken system. It was supposed to be *insurance*. Instead, it became the standard pension and an "entitlement" (to use the dreaded word).

suzy, What's mind-boggling to me is that housing sales in our area is strong with a capital S. Don't know where all those dollars are coming from, but housing prices also keeps increasing like mad. I think our area is expected to see a ten percent increase in housing prices this year. I'm confused too!

Here's an interesting link on home ownership.
http://www.zeffert.com/Ownership.html

I'm 44, Fishin.
By the time I was old enough to buy a house, they cost a lot more than an average yearly wage. And I'd wager that my life circumstances were very different from yours.
I know, CI, but some people are raking in the bucks these days. I don't know how the average guy does it, really. That is a good article. The "American dream" is harder than ever to reach.

I don't know exactly, but an average wage is $38000 a year, and 15 percent of that would be $5700. Assuming that an average American spends about twice as many years working as he spends being retired, the system seems fair.


Seems perfectly fair to me. For example, an average Chinese's real income is about one seventh of an average American's real income. ("Real" means "adjusted for the price level" here.) Yet it's the Chinese who send their savings over to America, and it's the Americans who scrounge off the Chinese. With that in mind, why is it unfair to characterize average Americans as spoiled, whining spendthrifts?

I totally agree with what cicerone imposter said about saving for retirement.