We recently talked about the catastrophic problems with Social Security, and the need for increased taxes in order to keep the program running. To be honest, the idea of raising taxes to cover for government mismanagement isn’t particularly high on our list. Different people and groups have different ideas on how to fix the program and here’s an interesting one!
Here are Five Fast Facts on rescuing Social Security:
- 📼 A Brief Recap - If nothing changes, the current program will pay out more than it takes in about a decade from now, meaning monthly checks will be cut. To prevent that for at least a few more decades, the current 12.4% tax would have to go up to at least 17%, meaning another $3-5k out of your pocket to taxes every year. Give more money to the same people who messed it up in the first place? Doesn’t seem like a great plan.
- 📈 Changes Over Time - Part of the problem is that no one has changed Social Security to match the country’s changing demographics over time. Originally, it took just 2% of workers’ paychecks and paid it out to just 2% of the population. Now, it takes 12.4% of our paychecks and pays out to over 20% of the population. I think we can all see where this is going, and it ain’t gonna work.
- 🤯 Bigger Is Not Better - The Penn Wharton budget model says that a bigger program (higher taxes, more benefits) translates into a smaller economy over time. On the other hand, a model that takes in less tax money and is more targeted with benefits would result in an overall economy more than 5% bigger over the next 25 years. That equates to an extra $11k in your pocket every year!
- 🫴 May I Have Another? - One of the problems is that politicians determine when people get access to their Social Security money. Aside from the obvious problems around needing permission from the government to access your own money, people with lower life expectancies – blacks and lower-income earners – will lose out on thousands of dollars through their lifetimes. So don’t die young!
- ⛔🧠 Pass It On - If folks had been investing money rather than paying it into Social Security taxes, they get access to their money when they need it, or they can pass it down to their kids. A low-income earner would end up with over $4k per year more in retirement than Social Security would provide, and a middle-income earner would have almost $48k more per year. Can we say no brainer?
🔥Bottom line: So don’t get absorbed by the doom and gloom about Social Security. There’s hope! But we do need serious people in positions of leadership in Washington, which means we need to be asking candidates what they will do, and then hold them accountable for doing it. There’s still time to solve this giant mess, but we can’t keep kicking it down the road.
What do you think of this plan for saving Social Security?
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