Social Security Tax Reduction-are you kidding me??

[jitterbug]

Am I the stupid one or is it our government? All we've heard for years is that social security will run out of money before we're old enough to collect - and now they are reducing our contribution portion by 2% Where does this make sense? In reality, they ought to lift the cap on salary deductions (once you earn $106,000 a year, they stop withholding social security taxes) and have the high earners continue to contribute just to get more money flowing in. And yes, I am fortunate enough to be married to someone who maxes out his social security each year in November and while we welcome the extra money in his paycheck in December - we'd also be okay with continuing to pay that deduction if it insures we can claim it when we retire!

For people like DH and I, we will take that extra 2% and I will add it to my 401k and he (who already maxes his 401k) will pull it aside to make other investments. But for those who will need social security most upon retirement (those who haven't saved heartily for retirement) - they will probably fritter that extra 2% away on lattes and fast food. That will help the economy in the short term - but who will be supporting them when they're 80??

[dancinmama]

Jan 4, 2011 18:23:58 GMT -5 jitterbug said:

Am I the stupid one or is it our government? All we've heard for years is that social security will run out of money before we're old enough to collect - and now they are reducing our contribution portion by 2% Where does this make sense? In reality, they ought to lift the cap on salary deductions (once you earn $106,000 a year, they stop withholding social security taxes) and have the high earners continue to contribute just to get more money flowing in. And yes, I am fortunate enough to be married to someone who maxes out his social security each year in November and while we welcome the extra money in his paycheck in December - we'd also be okay with continuing to pay that deduction if it insures we can claim it when we retire!

For people like DH and I, we will take that extra 2% and I will add it to my 401k and he (who already maxes his 401k) will pull it aside to make other investments. But for those who will need social security most upon retirement (those who haven't saved heartily for retirement) - they will probably fritter that extra 2% away on lattes and fast food. That will help the economy in the short term - but who will be supporting them when they're 80??

Uhm....you will.

Obviously, Obama and his economic gurus think that this is a good way to stimulate the economy. I agree with you that maybe there would have been a better way to do it, but I am not an economist, so I don't really know.

I am kind of surprised that you would be willing to pay even a penny more into the system in exchange for insurance that you can "claim it when you retire". Do you really think that that's realistic. The government doesn't do a whole heck of a lot efficiently. And instead of your getting any "insurance" of getting benefits, you could end up paying in MORE and then being means tested and getting LESS in benefits. You make good money and you're already contributing to your 401ks. The government is likely to say to you, "Thanks for those extra payroll taxes you paid (on earning over $106K), but since you make a lot of money and have a really nice 401k, you don't really NEED your SS as much as the next guy, so "Sorry".

[souldoubt]

I believe last year was the first year social security paid out more than they took in. The program though isn't necessarily insolvent, at least not this year so reducing the employee contribution by 2% for one year isn't the end of the world. There is no COLA increase in 2010 just as there wasn't in 2011 so I guess if there's ever a year to reduce the contribution it's a year when there isn't a COLA increase.

Also remember that it's just the employee portion being reduced for one year so your employer still contributes 6.2% on your behalf. I'm not a fan of eliminating the SS wage base limit. There are already talks that it could increase as much as almost 40% over what it currently is ($106,800) by 2018. If you want to give extra after hitting the wage base limit I'm sure you can donate that to charity and take it as a write off at tax time or simply send the government a check. The system needs some major changes to it that don't involve finding more ways to get money for a system that isn't set up to last. Kind of like how the government needs to stop thinking of ways to bring money in and focus on expenses when it comes to the deficit.

[Deleted]

Yeah, I know- crazy. Half of our savings will go into the retirement savings since we'll never see a dime of my SS anyway (DH is old enough that he's collecting it now). The other half will go to charity. Which is sorta where my SS payroll contributions are going to go, anyway.

[jitterbug]

I'm probably naive, but I do believe that SS will be there when I retire in another 15 years or so because I think there will be a giant uprising if it would go away. But I do think the benefits will be reduced by the time I get there - which makes alternative saving even more important.

And...I have already benefitted twice from SS in my lifetime. My father died when I was 15, so I got SS until I graduated from college at 22 (now survivor benefits end at 18 or upon graduation from high school). And my husband died when I was 34, leaving me with an 8 year old child and an $11,000 annual income - so I collected again until child turned 14 and my child collected until he was 18. So I probably have a different opinion of social security because it has saved my butt twice already.

[DVM gone riding]

SS is actually mostly fine-the reason it is a mess at all is because we allowed congress to "borrow" money from it when Congress has no way to repay it. If that hadn't happened it would be even more ok.
Medicare is a different story and will be truly means tested sooner rather then latter.
But I agree I don't think lowering the SS contribution level is the best way to stimulate the economy-though really it is a magic trick they are doing that across the board but not renewing the "making work pay" tax credit.

[robbase]

There is no "lock box" anyway and SS will just come from the general fund anyway, so don't worry so much about when SS will "run out"....worry more about when the overall budget won't be able to support it

[formerexpat]

I'd rather have the cash in hand than an IOU from the government in 35 years.

I hope this is the beginning of the reduction of the employee portion of SS and eliminating SS for the younger generation, or at least placing it into private accounts [deferred annuity possibly].

There can be a disability and/or death benefit in this private account.

There are already talks that it could increase as much as almost 40% over what it currently is ($106,800) by 2018.

It increased from $76k in 2000 to $107k now - 41% in 10 years...actually, it was 41% in 8 years.

[BeenThere...DoneThat...]

Jan 4, 2011 19:18:17 GMT -5 @athena53 said:

. Which is sorta where my SS payroll contributions are going to go, anyway.

...sad, but true...

[jitterbug]

I'd rather have the cash in hand than an IOU from the government in 35 years.

Yes, but we all know people who wouldn't manage that money well at all and would end up with NOTHING in 35 years, so I'm okay with the enforced tax. And I'm good with money now, at age 50, but I would probably never have saved for retirement when I was in my 20's.

[Deleted]

Perhaps I'm naive, but I don't see how anyone could spend that "extra" 2% on lattes and fast food. Even though I don't get paid again until next Friday (the 14th), I am able to look at the upcoming paystub. My check is actually $3 LESS than normal. Yes, my SS deduction is less than normal, but my federal tax deduction is way up. I have heard this is because of that whole "making work pay" thing. So since I'm actually getting LESS money in my paycheck now, tell me how this 2% reduction is a good thing?

[souldoubt]

The making work pay tax credit was generally a $400 increase at most for working individuals ($800 for married). I can't speak for anyone else without seeing what they make, pay frequency, etc but for me the 2% cut in SS is 2% more in my take home pay this year over what I was originally expecting. I'd rather the government ran a balanced budget even if that meant not implementing the SS cut this year but this is about the only way that I directly have benefited from anything done in recent years that's supposed to put more money in people's wallets.

[Deleted]

Well, I'm married, and have a gross pay of $1066.50 every two weeks. I haven't changed anything pay-related, and as far as this paystub is concerned, there hasn't been an increase in our health insurance either (yet). So, I guess I'm one of the lucky ones that doesn't benefit from this? Oh well.

[souldoubt]

It could depend on other taxes but you might have already looked at those. For example in CA SDI went up 0.1%. That's not a huge amount but in some cases there also could have been changes to your state tax tables and every little increase chips away at your gross pay. You could look at it like you aren't one of the "lucky ones" but you benefitted from the making work pay tax credit for 2 years while others didn't. Looking at your bi-weekly gross pay it looks like you would benefit from the SS cut even after the working pay tax credit expires but if you have something like insurance premiums, FSA, etc reducing your taxable income as far as FICA tax calculations go then you might not benefit. Too many variables to say for sure though.

[Kung Fu Panda]

I just increased my 401k contribution by 2%..go me!

[wvugurl26]

Got paystub for Friday's check today. SS taxes were ~$30 less. Federal taxes went up by ~$14. Next check will have increased insurance rates so I doubt I have any increase in my take home pay, maybe $1? I've already got enough going to TSP to get the full match. I'd rather diversify and put other money somewhere else instead of putting more into.

[upstatemom]

This is another example of the Federal Government shooting from the hip and not caring about long term consequences of their actions. They do not care about SS since they do not have to contribute to it and have their guaranteed cushy pensions.When they talk about cutting SS, have you ever heard them offer to cut their undeserved entitlement?
Like others on this thread said, I took SS out of my retirement calculations long ago, I have no faith that it will be be there in 20 years.

[Kung Fu Panda]

SS is loss for me, no way it will be around when I retire, and they will continue to raise the retirement age, just to make sure. It will be close to 75 in 20 years with the way its going..

[runewell]

Jan 4, 2011 18:23:58 GMT -5 jitterbug said:

In reality, they ought to lift the cap on salary deductions (once you earn $106,000 a year, they stop withholding social security taxes) and have the high earners continue to contribute just to get more money flowing in.

Low earners get a lot back from SS than higher earners do, so it's actually fair that at some point the wealthy stop getting taxed. It's more a question of how much each person should pay in taxes, a question not confined to SS.

But for those who will need social security most upon retirement (those who haven't saved heartily for retirement) - they will probably fritter that extra 2% away on lattes and fast food. That will help the economy in the short term - but who will be supporting them when they're 80??

The government is thinking short-term when it did this. The point is to put more $$ in the hands of low earners because there's a better chance it will be spent and prop up the economy.

[phil5185]

It will be close to 75 in 20 years with the way its going..

Maybe. But for the first time in our history, life expectancy has declined rather than increased. The Boomers are being hit hard with the diseases of 'excess' - obesity, diabetes, poor muscle tone, poor aerobic function, arterial diseases, alcohol, drugs. Our conveniences are killing us - fast food on every corner, a microwave in every home, convenient quick-cook packaging at the grocery store.

[Deleted]

Jan 6, 2011 10:43:47 GMT -5 phil5185 said:

But for the first time in our history, life expectancy has declined rather than increased.

True. The life actuaries in my company told me that they'd been building in anticipated mortality improvements into their models- mortality tables take a very long time to compile and analyze, so they're out of date by the time they're published and the assumption has always been that people will live longer than the tables imply. They told me they're now seeing that reverse.

[zibazinski]

If they didn't cap what they paid out monthly then I wouldn't care if they didn't cap what you paid. But since they don't, I do. Also they need to stop counting other forms of income and deducting it from your social security check. Because some people saved and others didn't? ANOTHER form of robbing those that save vs. those that don't.

[Cookies Galore]

We got paid today and my take home went up by $13 for the pay period (12/13/10-12/26/10). Social Security was down $27.87 and Federal tax was up $14.28. Next pay day on January 20 will include our new salaries (we got 3% raises) and our increase in insurance contribution (going up from $29.50/check to $35/check).

[tt00]

That is because our dear old gov't is filled with morons.

[Savoir Faire-Demogague in NJ]

Some of you have noted that your federal tax with holding has gone up. I thought there was no change in the tax rates?

Anyone??

[The J]

The making work pay tax credit expired.

[Savoir Faire-Demogague in NJ]

I did not get that credit...

[Clifford]

Many people would never save anything on their own. SS should not be done away with, or we would just wind up paying the same or more (probably by higher income taxes) for social programs when retirees had absolutely nothing coming in.

What Congress fails to realize is that you have to consider both incomes and expenses. They just chose to lower the income side of the budget, where is the 2% decrease in expenses?

[upstatemom]

Jan 6, 2011 14:19:29 GMT -5 Savoir Faire-Demogague in NJ said:

I did not get that credit...

It was part of the the payroll tax withholding tables, everyone got it in their paycheck but some double income families lost it when they filed their 2009 tax returns and it will hurt again when the 2010 returns are filed.