What irks me the most is that our current batch of politicians seem content to wait until the very last minute before they attempt to fix this problem.
Our political process doesn’t reward bold leadership and advance problem solving. Elected officials who dare discuss the reality of our budget and tax policies are not rewarded by votes. They are often vilified in their next election. The Social Security system faced insolvency in 1977 and again in 1983. Changes were made at the last minute as they will be this time. The sad reality is that the changes would be less painful if we were to make them sooner rather than later.
@@oldsesalt8496 I’m not meaning to come across as disrespectful, but I totally disagree. Nobody wants Social Security to fail. In my opinion, one side has locked itself into a no tax increase position to appease their voter base. This unrealistic position makes compromise very difficult to achieve. Fortunately, cooler heads will prevail as the day of reckoning approaches. Same as it did in 1977 and 1983. Social Security will not fail nor will existing beneficiaries see a significant reduction in their payments. Don’t spend sleepless nights worrying.
Completely against raising the retirement age. Might be fine for people with office jobs, but for those of us who do hard physical labor, our bodies are pretty worn out by the time we get through our 50's. At this point I am just hoping I can keep working until I get to 65 and am eligible for medicare. Doesn't matter how much of a hit I am going to take retiring before 67 because I am not going to be physically be able to keep going. Get rid of the income cap to start with. Not sure about raising the actual rate. I already pay considerably more into FICA than I do in federal taxes.
I agree about different jobs having different retirement requirements. For example in a military career a person can retire after only 20 years. But how would this be implemented for other careers. Not everyone in construction for example have physically hard jobs. Perhaps what is needed is raising the FRA but also loosening the definition of disability starting at age 62 and decreasing the disability rules until FRA.
Well, the issue is that people are expected to live longer, as the generations pass. Baby boomers life expectancy was at like 70, Gen X at 85, and Gen Z is expected to live to 100, according to one source. So like, they thought it would make sense to heighten the retirement age.... Now obviously it's not all the same for each country. Some people in the US love shoveling Mc D.s hurgers down their throats, and become unhealthy earlier. But generally, we are able to live longer if we actually take care of ourselves. This is the cause for concern when it comes to retirement age. If people are retiring earlier than they are supposed to, then that means we will be supporting them even longer in retirement. *The difference between a person who retired at 65 and dies at 70. 5 years retirement. Versus a person who retires at 65 years and dies at 100. That's like 35 years of retirement that social security might have to support them through.* I'm all for them raising it, because of these statistics.
Oh, yeah, I forgot to mention that chosen job is a person management thing. People should look for something else to do if they know they are unable to do hard physical work. That's not in the governments full control. The government isn't the one choosing our jobs for us. The government job is to manage social security.
if ou pay for social security yourself, which you do, there is no reason why you should not be able to retire once you have paid in an actuarially sufficient amount. hard physical work is not the only reason a person might want to retire before they are ready for the glue factory. the whole point of Social Security is that you paid for it yourself. for the first time in history ordinary workers could expect to retire while they still had a chance to enjoy it...becuse they paid for it themselves. before SS only the rich could expect to do that.
I would be willing to increase the amount that we can what the employer pays in 7.5% and raise the capital of 200,000. I watched Devin Carroll on RUclips and he says if they switched the formula from using wage increases to the CPI
And that is the point ignored in this video: Government created Social Security during the panic of the Depression when everyone thought centralizing economic power over the people was the answer, and Social Security was one way to do that. The people were absolved of the 'hassle' of planning for and being responsible for providing for their own retirement. Politicians loved it because it gave them more power and control over the voters, as well as a way to occasionally generate fear through the threat of 'cuts' in order to get re-elected by pledging to protect the program. No one seems to understand (although Schmidt hints at it) that the government promised a defined benefit scheme without resourcing it through investments that generate enough return to make the program sustainable. A pay-as-you-go system primarily dependent on always having substantially more workers than takers is a joke to anyone with a brain. But when politicians can't see beyond the next election and the people are willing to give up control over their lives, you get programs like Social Security, and everything else that makes the populace dependent on a central government.
You forgot another easy fix that affects very few people, raise the cap on maximum taxable earnings subject to Social Security taxes. It is currently $147,000. That means someone making $1,000,000 pays the same amount in Social Security taxes as someone earning $147,000, $9,114 for the employee and the employer. For the person making $147,000 that is 6.2% of his income. For the person earning $1,000,000, it is less than 1% of income.
But, the person earning income in excess of the SS wage cap also doesn't get additional credits toward their future monthly benefit amount. The benefit calculations only take into account the amount of income subject to SS taxes.
@@g0989 I vote no. First, the threshold goes up every year. Second, your maximum SS benefit is capped so additional funds won't add to that contributor's benefit. Last, IMHO as a money manager, SS is one of the most poorly designed programs in history. I would rather a person use their money on landscaping, vacations, invest in their business, buy something for the house, invest in stocks (preferably the ones I own!) you know.... help build the economy rather than add an extra $50 bucks a month to your payment. The greater good be damned.
As a self-employed dentist I have always grumbled about the 6.2 % times two because it increases my payroll costs and makes it hard to make a profit. I stopped grumbling when I turned 70 and started to receive nearly the maximum amount of social security benefit. I can work a little but still have a substantial income when my profit is added to the benefit received. Raising the percentage wouldn't be my favorite but I can see the logic.
@@TheRealEdStoner: Depends on how he invested it. Leaving it in the stock market for a full career, sure. But a big reason they HAVE social security is so few people save enough or consistently.
Loved the riddle! Raise the tax and raise the FRA. The more you spread the solution out among the possibilities, the better. Small tax increase, small FRA increase, small COLA etc = large positive impact on the Trust.
#7 is the best option but I think you left out an option that would work well in conjunction with it and that is to eliminate the cap on the withholdings.
I hear you. The number of people who receive income above that amount is shockingly low. The mega rich decamillionnaire and billionaire types (whom we think about as the obvious offset) got that way through capital gains on their businesses for the most part. Don’t get me wrong, it will help a little, but not the way one would hope for
@@HolySchmidt true, but it could reduce the amount we expect our children to carry in option 7, which I agree is the most probable solution. It would mean perhaps 8% vs 10%. With today's wages not keeping up with inflation, that seems unfair to me.
@@HolySchmidt According to the social security website, about six percent of workers exceed the limit. I’m imagining if they raise the ceiling to around $200k that would generate quite a lot of revenue.
I used to agree with Geoff that the revenue collected would be small, but looking at the latest BLS wage statistics, I'm not so sure. Total payrolls are about 8 trillion. If about 5% of this is over $150K, then an additional $50 billion would be collected, on top of the $1 trillion currently paid - that's a 5% increase. It's not much, but it's more than I originally thought.
@@July.4.1776 We all paid in almost nothing. In my case about $200,000 matched by my employer. I will collect in 3 years when I turn 70. I will collect about $56,000 per year. In less than 4 years I will get all the money I paid in back. Benefits are too high.
@@tomblevins5020 You are not factoring in inflation over all those years. Why do you seem to think seniors are all greedy? I'm 73 and living on $1,500 a month SS; that will cover a small, crappy apartment in an undesirable part of town in a low-cost state. I still have to eat and all the rest with serious medical bills. However, I tried as best I could to plan for and save for retirement; I have less than $350,000 now which returns not so much these days. It's not much, but I have no debt at all, a fairly new car, a small 15-year-old custom house (paid for) I had built on 5 rural acres and just hope that I will be alright. The percentage of rich, middle class and poor seniors is the same now as that of the general population. I was endlessly grateful for SS and Medicare when I took in my 88-year-old grandmother when I was 28, a single mom, divorced with a minimum wage job and trying to make my way in the world for the first time; I had no money to support her as I was struggling myself. Those programs sustained her, a minister's wife who lived as frugally as possible, for decades. Why are you not able to see the full picture?
Been saying for many years: Eliminate the salary cap contributions.The limit now is ridiculous.147k.Everything else is off the table.Married couples bringing in 6 figures will contribute greatly. That is is the answer and has been talked about for years but nothing serious has ever been discussed.
A combination of changes so that almost everyone has a little skin in the game. Raise or eliminate the withholding cap. Increase the payroll deduction. Eliminate the dependent child benefit for retired workers receiving Social Security (I know retirees who have moved to the Philippines and knocked-up young girls and now receive 50% more in SS benefits). Reduce the spousal/survivors benefit for higher incomes or make the full amount of their benefits taxable after $50K or so of income.
I know this happens, and it irritates me as well. However, I think there is a percent limit so that a fixed "pool" of money is split between the minor beneficiaries. In the example I read (also from the Phillipines), the kids split $1,500. If another kid got added, the same $1,500 was just split between more children. (Or people. I think the kid's mom also gets in on the pool because she has to stay at home and be the caretaker. I am not sure about this point, but that sticks in my memory.) So do we have a bunch of old guys that have figured out how to make themselves more attractive to some younger chick? Kind of a monetary equivalent of a yellow Camaro? Also, I don't think the children actually have to be his. I think he can marry the children's mother and adopt the kids and voila, this new family gets more SS benefits. Ain't America grand! BTW, I am not an expert on SS, so maybe I am not understanding this correctly. Maybe someone will understand this better and can enlighten us. Just seems like a stupid thing to do when the system is running out of money.
Get rid of it. The SS recipient who gets $1,700/month, would have received $10K/month if the same money was put into a safe mutual fund from age 25-65. SS is a NEGATIVE return.
And they could choose which heir would inherit the balance. Adult child, charity, whatever. The present rules penalize workers without survivors deemed worthy of survivor benefits according to an antequated system. It's not 1930 anymore!
5 and 6 look good. Also, eliminate the cap on SS witholdings, but (regressively) eliminate the cap on payouts. just as an example, 12% from 6721-8334, 9% to 10, 417, 6% to 14,584, 3% to 20, 834, and 1% above this? Also, if a Corporation pays an exec in stock, they must pay 6.2% FICA on the value of the stock at the time of payment. The Exec too. They can pay that annually, at tax time.
MR. SCHMIDT, I ALWAYS ENJOY WATCHING YOUR SIMPLIFIED VIDEO'S...... I ALSO AGREE TOTALLY WITH YOU ON RAISING THE 6️⃣.2️⃣ TO A HIGHER PERCENTAGE... AS YOU SAY, IT WOULD BE THE BEST AND ( QUICKEST ) SOLUTION TO THIS PARTICULAR PROBLEM.. AN EASY FIX‼️‼️‼️‼️ THANK YOU FOR ALLLL OF YOUR HARD WORK‼️ ** GOD BLESS ** **TAKE CARE** TROY👍
Sorry, but taxing your Social Security benefit because you're considered "wealthy" is just dumb. The current threshold for a married couple is $32K. I don't know any married couple who makes over $32K, collects Social Security, and lives in a mansion or drives a Bentley. That Reagan era cap should be adjusted or removed. Social Security benefits were meant to be tax free and should remain so - or - raise the threshold to something more reasonable.
Option 7, the 6.2% hasn't changed in over 30 yrs but the maximum earnings subject to the Social Security payroll tax has gone up from about $50k in 1990 to $160k today.
@@rusted5408 What is your point? Benefits in the U.S. are too high. Greedy seniors should not be supported by their children. They had decades to save for their retirement.
@Tom Blevins if you feel that way then just don't take your benefits when you retire. It's a free country. But I paid for the seniors while I worked so you can pay for mine now. Oh. Wait Surely you're a sucker, not a giver. You live off the system.
Option #8 is to cut Federal spending by, say 75% to pick a nice round number, and to put the savings into SS. The people who make money off the government have done so long enough. They can take a pay cut or else use their great skills to find a productive job.
Jeff, did I miss you talking about the option of removing the income earning cap where today SS tax applies up to the first $147,000 (cap), beyond this there is no SS tax?
@@kennetzel6101 No. You don't. Honestly, you should be allowed to opt out of social security completely and get 15% higher wages every year and go your own way. It's just a massive grift as it exists now
the cap is set because that's where the tax would cost more than the benefits are worth. raising the cap would be like making a millionaire pay ten dollars for a loaf of bread that costs the ordinary worker one dollar. the rich already pay more than you do, and get back less as a percent of what they paid in. that is what enables SS to pay the poorest workers more as a percent of what they paid in. "percent of your earnings" is not the only way to measure fairness.
A small adjustment to to payroll tax solves the problem. Going from 6.2%to 6.25 % takes it a long way. If you take the cap off and add a forth bend point for high earners they pay more in and still get more back using the same system of the bend points. I never had an issue paying into social security as I watched my grandparents and parents collect it knowing full well my day will come when I will collect just as the grandchildren will collect some day. Social security is not an entitlement as I have paid into the system for over 40 years from my first job actually I am still working and paying into the system.👍
One solution you didn't mention is adjusting the income cap on Social Security tax. Currently I believe this is $147,000. Any annual income above that is not taxed for SS purposes. Removing or adjusting that cap could provide more income for the trust.
@@MJFisher76 Interesting. I have never seen that point in the many discussions of this I have read. So that begs the question, would that greater return to top earners offset what they would contribute or would there still be residual benefit the the trust?
@@vancepiccin1711 Obviously the "Math" would have to fix the problem, or do so in combination with another of these solutions. Changing the retirement age spreads to 64 minimum, 68 FRT, 72 max is another idea.
Nice video. I am just about to start collecting social security at the end of 2023. I think a combination of your suggestions could be better. A little pain for everyone to save social security. What ever is done it needs to take everyone at every age into consideration. Fairness for young and old is important. Thanks very much for the video.
Combine reductions with a small increase in the Tax, combined with adding: 1. Reduced bend point between the 32% at lets say $5,000 to $6721 to 30% and then reduce the 14% to 12%. 2. Also increase the minimum age to 62 (it is 60 for widowers and widows survivor benefits. ), 3. Allow 25% of the Trust to be invested in AAA+ Corp bonds and I think that would get us there with the minimal pain. 4. Give the trustees more tools to adjust the program vs now it take an Act of Congress to make changes.
Option 6. Raise the threshold level. OPtion 7 is an issue for the self employed due to double taxation and would hurt small business and entrepeuneurship.
self emplyed tax is not double taxation. you pay for SS the amount that will pay for your expected retirement. for not self employed, it is considered necessary to require the employer to pay half the necessary, otherwise they would not pay the employee enough to "pay for it himself." as it turns out many eonomists say the "employers share" is really the employees money. don't trip youself up playing the "sister got the biggest piece of cake" game. the system is completely fair and does what it needs to do.
A combination of eliminating the cap, raising the minimum age for both early and full retirement age, and raising the payroll tax rate gradually to 7% would secure social security for many decades to come. Wish someone would grow a pair and get to it already
Yes, that's a terrible idea. People would be locked into staying wherever they live. If I collected less than CA people for 10 years, I would be less able to move to CA because I would have less savings than if I had collected the same amount all along. (probably) Plus, they pay more to live in their nice climate; why should I subsidize them?
actually, basing the tax on earnings, and the benefits based on the tax paid automatically takes care of the different regional cost of living. since the payout is progressive, working in a low wage area then working in a high wage area is at least partially compensated by the higher benefit rate to lower wage workers.
Eliminate the earnings cap on social security taxes (currently $160.2K). However, only tax the income above the current cap at half the rate (3.1%) that the income below the current cap is taxed.
Bingo! I’ve been saying this for years. Short sweet and effective! Of course congress would debate and form 300 committees to find a “comprehensive “ answer and dish out sound bites every 2 minutes. No wonder everyone hates politicians.
In all likelihood, I agree, #7 is going to probably happen. It's sad though, our country as a whole is unwilling to accept responsibility for a bad policy and instead (again) saddle the bill onto the next generation.
Geoffrey, can you address how doing away with the maximum wage cap of $160,200 for 2023 and higher in future years might strengthen SS. How do we get our politicians to look at this option to save SS for future people who want to retire. I believe everyone should have answers. We ALL should pay into SS no matter what your wages, it’s only fair.
I am cool with them raising that tax rate personally. What I really think they should do as well - even though it would hit my wallet personally - is to remove the ceiling. Make a 4th, absurdly low bend point and continue taxing those of us making over the current SSN limit. Folks like us are the ones who need that money the least, and I would rather see social security continue and be (very) minorly inconvenienced now if it would save the program.
#7 makes sense, combining it with a variation of one or two of the other options would make even more sense. At a minimum the Payroll tax % should be adjusted either annually by a fraction of a percent or at least be subjected to a mandatory review every so many years....30 yrs is a long time to wait.
exactly. one tenth of one percent per year would do the job...that's about a dollar per week per year until the increase is 2%...by that time your real income will have increased by 20%.
Fixing it continually, raised from 148,000 to 160,000 which translates to many households pay an extra 1200 in SS tax withholding and rising every year. It’s gone from 60,000 to 160,000 in a short period of time. Why it this ignored in the SS conversation. It’s a annual tax hike on workers every year.
#7, the answer that doesn't annoy anyone, except for those paying the bill. Kinda surprised it hasn't been raised in over 30 years. Politicians love a good quick fix that didn't cost them anything.
but all politicians are now in love with the idea that they personally will never raise taxes, they are quite willing to double spending but wont take responsibility for raising taxes. and they are stupid enough that they dont see any problem with these two things.
the tax was raised enough in 1983 to enable the boomers to pay for their own retirement like every other generation has, but the boomer generation was too large for pay as you go to be fair. that raise has done its job. now we will need another raise to pay for our longer life expectancy. you won't like working longer into deep old age, even if you are going to live longer. it's not just a matter of hard physical labor. since you are paying for it yourself, you should be abble to retire whenever you have actuarily paid for it, SS enables poorish people to retire...something only rich people could do in the past.
@4:20, by reducing the two tiers even more, one is making Social Security an even greater wealth transfer than it already is. It suffers from the same sort of inequity as the regional COLA issue where workers who had to pay the same percentages of their income in FICA Social Security taxes, but get a proportionally smaller monthly benefit. Sorry, the bend points already make Social Security an unfair system, and this proposal just makes it even more unfair. Thanks for recognizing this.
I opt for #7, however instead of increasing the tax rate, there should be no cap on withholding of salary, or increase it to $300000 for single and $500000 for married joint filers, right now it is cap at $147,000. Upper management hit the threshold in mid-year right away
And that’s where the real issue is. All is based on political security and not what is best for the citizens. Government never produces anything that’s effective or efficient.
the fundamental problem with all these solutions is you are changing the rules of the game mid way through, and putting these solutions in the hands of the folk (government) who broke it to begin with. So all of these solutions just cost the tax payer more money with less payout at the end, and for those of us who have been being taxed for over 30 years already it's hard to have faith in a good outcome for us. Good video, great points and insight....just a grim preview of what's to come.
congress wants to change the rules. the simple, honest solution is just to raise the tax--the amount you save--enough to pay for the extra years you are expected to live. increaing the tax about one tenth of one percent per year--about a dollar a week per year for an average earner--will do the job.
I think increasing the 6.2% rate isn’t reasonable for young people as they are already struggling. Removing or reducing the gift to those already making higher salaries by increasing the income ceiling makes the most sense, but business will push back. With record profits, they don’t have much of a case.
@@Satjr35031 We did but just because we struggled doesn’t mean the next gen has to struggle more. They are paying a higher percentage with lower earnings and many have student loans.
@@theresarowe1656 I can see your point that we struggled But we had student loans too and made a lot less than todays wage earners plus the 6.2% has been in effect since 1990 over 32 years ago
@@Satjr35031 Just because something hasn’t been increased isn’t a valid reason to increase. When does it end? 25% 50%? I didn’t have student loans because I could pay by working; not possible now. 66% first-time bachelor’s recipients borrowed for their educations in 2007-08, up from 49% in 1992-93. And way up from 1970.
Hey Geoff! What about your riddle in the beginning? The “making 7 even w/o addition, subtraction, multiplication, or division.”? Remove the “s”? Thanks for this video-makes total sense. Also, I didn’t realize taxes I pay on 85% of my SS go back into the program. I feel better about that.😊
While I understand the answer, it is subtracting the "s" from the string of letters :) I personally don't feel good about paying ANY taxes into Social Security. I'd never suggest we do away with the program. But let's do away with the mandatory contributions. Let people decide if the program is well run and serves their needs instead of forcing every worker to contribute from 6.2% to 12.4% of their earnings. If the program provides a good return for the contributions demanded, people would opt-in. If you have to force them to pay into it, how good is the program?
When you increase payroll taxes, remember that employers (small businesses, too) have to shell out more and that will increase prices. McDonalds has to pay higher wages and therefore more payroll taxes making people freak out because a hamburger is now 12 dollars. It is all relative. If this country would just take a year and only concentrate on it's taxpayers, instead of all the other countries in uproar, the problem would probably fix itself. We can't keep spending on everyone else in the world and ignore our own home citizens.
@@SandfordSmythe Not true, The SSD is funded through SS. It does not have its own funding. There have been plenty of reports that SSD is hurting SS and to some degree, the number of people applying and receiving has increased over the years....another reason why SS has gone from 1% to 6.2%. Government keeps adding more benefits.
@@berardipeter They both tap the FICA money in different proportions, and they go directly into separate funds. The split is changed to reflect the needs of both, and it has gone either way over the years. Right now the reserves of SS Old Age will only last a few years, so funds from the SS Disability fund will be diverted to back it up.
Remove taxable limits on income so they continue to pay a percentage for their entire yearly income instead of these cut off income limiters of course this might not be needed if the fed ever re-payed the IOU's they made to Social Security when they took monies out of it for the general fund.
HDDynaRoy: They wages haven't all been stagnant for 30 years. It depends on the type of job, etc. Staying in jobs that are in decline and being unwilling to learn or change is a BAD strategy for maintaining wage growth, but many people do that.
Maintaining the same tax rate brings in more money as wages and the tax base grow. The problem is that SS, like a Ponzi scheme, always depended on an ever increasing payer base which we do not have with a negative growth birth rate. The government needs to control spending which they just proved they cannot do with the $1.7T bipartisanship omnibus. The govt paying able bodied workers over $100k/yr in some states to stay home, like my massachusetts, is not a wise move.
Why? With inflation, tax receipts go up, so it's not like more money is not coming in. I see it the other way, there is no reason to increase tax rates if the program is well designed and well run . Politicians who say rates need to increase due to inflation are hoping you don't recognize that incomes also increase. The only taxes that may need to be tweeked are excise taxes that are fixed dollar amount per unit of good. I.E. gasoline taxes that are so many cents per gallon. They don't adjust for inflation. But taxes that are a percentage of a value do rise as that value rises.
The other factor to take into account is that at the average life expectancy the first year baby boomers were born (1946) will on average die in 2024. Each year after that another group will pass. The bubble needed to fund Social Security will have passed through the system by about 2042. The adjustments you mention are still needed but only for a short period of time. And although the following generations are smaller they are not a huge drop in the US like they are in most of Europe, Japan and Korea.
Sadly what’s also being discussed in Congress is applying means testing to social security. Adding all of your annual income together (Social security payments, wages (if any) 401K and IRA distributions including RMD’s, pensions, interest and dividends and proceeds from stocks) if your total income exceeds the limits imposed, your monthly social security amount will be reduced or even entirely eliminated. The annual income maximum that is currently being discussed is $80,000 Apparently this means testing would apply not only to those who will be applying for Social Security in the future but to current recipients as well. It would be done each year as part of filing your income taxes. So in effect your monthly social security payment would be adjusted annually based upon your income level. Those that saved for retirement would immediately be penalized for the money they saved, by having it reduce (or eliminate) their monthly social security benefits. Let’s hope congress chooses a different method or we are going to need Jeff to create another video entitled “What to do when your retirement plan goes up in smoke and it’s to late to do anything about it!”.
Opt. 7 seems most reasonable, fairest and fastest repair. Without this option having been used in the past (as it was referred to) all current recipients would be in trouble 🙂
All you're going to do is make the problem worse. The problem with social security is DEMOGRAPHY, not a question of taxing young people. If you tax young people more they can't afford to have as many kids and the population contracts and you get the Japan death spiral
As a younger person, I think the fairest place to cut would be benefits over a certain amount, as well as ratchet down the benefits, far before we cut costs. Whatever happened to people caring about future generations? Retirees need to sacrifice, otherwise the young will just get even MORE economically radicalized and tear down the whole system
As a high earner self employed person nearing retirement, SS payments were big part of my tax liabilities bc we have to pay double into the system. I don’t appreciate young people making comments about all the old people are bankrupting the country…, what I’ll receive from SS is extremely low compare to what I paid in over the 35yrs of my contributions!! 🥵😳 just saying!
Of course all of your solutions are viable and make perfect sense. However maybe it would be best to have very small adjustments to all of the above. If we only have to delay full retirement by say, another month, that would be far less painful than an entire year. Similarly raising the payroll tax .1 or .2%, and raising the taxable Social Security income by just one or 2% would have a very powerful effects as well.
They could start raising the FRA right now by one or two months each year until it got to 68 ish. There really wouldn't be that much pain to anyone involved; including politicians worried about re-election.
What about taking the cap off of SS tax on the yearly salary? I think this year it was roughly $150K. So once that amount was earned the wage earner paid no more SS taxes for the year. Maybe that would only put a small amount in the SS coffers but every bit counts.
I agree that simply raising the social security tax to 7 & 7 % or so would be most palatable perhaps augmented with phased increases on taxes to distributions (up to 100% as taxable income).
I think a combination of three of the things you suggested would be best. Increase FRA to 67.5, allow privatized investments, and increase payroll taxes slightly. That combination would soften the blow to everyone and really prop up the system for many years.
Jim Owens: No one is stopping anyone from making all the investments they want, to prepare for retirement. If people would save and invest responsibly, only the sick and very low income would need social security.
@@rogergeyer9851 Good point. I have never earned a lot of money, but I have always paid myself first. And when I began my journey toward retirement, I followed the literature published by the federal government. Yes, I went to the library and read the literature. In those days the government encouraged us to manage our individual retirement accounts alone without the aid of a personal financial planner. So I did that, too. I will never acquire the very high skill and knowledge level of Geoff Schmidt, but I get the basics. Save and invest. Look carefully where you place your money. Index funds are the lowest cost and the easiest to manage. If I can do this, anybody can.
Increasing the payroll tax is the only option that does not affect those currently receiving social security and that was one of the huge arguments with the plan
I think a combination of things would be the best option because each could be smaller than if a single one was chosen. Increasing the tax rate and increasing the age of FRA and increasing the payroll cap, while possibly decreasing the rate of increase of benefits, or reducing associated benefits while keeping the primary recipients the same. Small changes are easier to take than a single large change. The thing I don't like is the suggestion of putting Social Security into the annual budget shennanigans and subject to political games that some politicians on the right have suggested. I think it's good that they are starting to think about it though because small changes made sooner are better than larger changes at the last minute.
So it all comes down to more taxes and less benefits. Sometimes the benefit reductions are tricky, like making you wait an extra year, but it's still a benefit reduction. It will be decided based on votes. There will be a lot of old people and few workers, so of course, soak the workers and make it even less worthwhile to work, damaging the economy even more.
Best solution? Give everyone their money back, end the program and let people be responsible for themselves. I could take the $500,000 me, the wife and our businesses have paid in and buy enough rentals to generate three times more money than we will ever receive from Social Security.
And the government would still win, think about the interest the government has made on that $500000 over 40 years. Pull up a interest calculator with the average 5% returen on government bonds over 40 years and tell me what we come up with, then multiply that times 70 million people collecting right now. ($ 500000 with 5% interest for 40 years would amount to about $1.5 million ) ( Some one in the government has their hand in the cookie jar )
Frankly the limit on income subject to Social Security tax should be lifted from $160,200 and removed completely. That would go a long way to funding the program for everyone.
It would help those at the lower economic scale at the expense of the wealthier. It is neutral now, where everyone gets their benefits based on what they paid in. I think that is fair.
Here's a novel idea, how about the entire government STOP spending our tax dollars like drunken sailors? Both parties are guilty of this and act like it's a contest to see who can waste our money the fastest! How about a pay cut for any politician who proposes to raise or create new taxes? And maybe consider raises only for those who have found a way to SAVE money? Unless we get spending under control, it won't be long until we are the country who used to be the dominant country in the world! If politicians would try to be efficient like major companies do, we wouldn't always be worrying about running out of money! Both parties got together to pass the 2020 Secure Act which has essentially stolen our ability to pass on most of our hard earned money to our own family! Where is all those $billions or $trillions of dollars headed? And they're already playing with it again (though not as bad) in a 4500 page last minute bill that very few if any could have possibly read! God knows what else they put in it! 🥵
While I am not looking forward to more taxes, I think that #7 is the most likely. To reduce the gross percentage increase, I would remove the income cap on wages subject to Social Security tax. I would go to 6.4% for each side (employer / employee) for a total of 12.8% SS tax. This would make our total SS+Medicare taxes 14.05%. If you remove the cap at the same time, and combine that with a phased in increase to the FRA to 68, you will get very close to a sustainable system.
@@Satjr35031 That is a substantial tax increase. When I was doing the math, I did not see a need of quite that much. When you remove the cap subject to taxation, the two combined were substantial. It may need another .1% or so to 6.5% on both sides, I believe you hit the numbers needed. I could, of course, be wrong.
@@Satjr35031 Oh I know that it is just a little bit more...But we do not need to increase taxes to that level. Congratulations on surviving with a much lower level of taxation - a lower level of taxation would certainly be nice. We need to do one of two things: Cut total benefit spend (eg. increase FRA) or increase taxes, or both to make the system work. IMO, both need to happen, but not to the level you suggest.
What about raising the maximum taxable earnings (e.g. $167,000 in 2023) to unlimited (the same as for Medicare taxable earnings) and adding another bend-point to the PIA calculation instead of making arbitrary increases to the maximum taxable earnings every year? This is effectively a variation of "3) PIA Rebalance", and it's still unfair to high-earners, but a little less so with an additional bend point.
Take the limit off, and set a maximum benefit of the median family income. Same basic idea, collect more from the million a year crowd, but not end up paying the 15% ($150,000/yr) that last bend point would give them.
They should have raised it sooner from 1990 at 6.2%. Having no raise in 33 years is ridiculous and especially so when they knew the baby boomers would be coming along. A relative and I were discussing SS about a year or so ago. Upon its inception, the average American lived to 65 so they were on getting it for three years. Based on the internet, they aledge that the average age is 82/m and 84/f now. Based on that, there has been more strain on SS funds also.
I was curious what percentage increase was needed to balance the fund (assuming no other change was enacted). The 2017 SSA report had this: "Social Security has a long-run actuarial deficit of 2.83 percent of taxable payroll, according to the 2017 Trustees Report. This means that the deficit could be closed immediately if tax rates were raised from the 6.2 percent paid by both workers and employer (a total of 12.4 percent) to 7.7 percent each (or 15.4 percent in total). In other words, the deficit would be eliminated if workers and employers each paid 1.5 percent of wages more in Social Security taxes." Sounds a bit steep to me, so I am guessing a combination of the changes mentioned will be done.
The problem with raising the tax rate is that it hits the poor the hardest. It's a regressive tax. I suppose you could use the earned income credit to offset the SS increase, but then you are just taking money out of one pocket to put in another. Personally I would increase both the FRA and the early retirement age one year using the same two months per year system now in effect. And I would also take the limit off the income subject to the SS tax, every dollar would be taxed at the current rate. The last thing would be to put a maximum limit of the SS benefit. There already is a maximum benefit for some combination of benefits, but I don't know details. I found out it won't affect me and I lost interest.
@@chessdad182 for how long? Today politicians can make a partial increase and thus kick the can down the road. I think the number you ask for is roughly 17% combined, and it may be slightly higher, but it is roughly 17% ( 8.5% each side)
@@mikespangler98 Agreed. The only fair way to minimize the impact of the poor, which is what SS is all about, is to eliminate the wage cap when deducting for OASDI from a paycheck and change the bend points that only affect the 32% and 15% range (e.g. make the 32% range half the size with the higher half like 12% and make the 15% range like 7%). I don't know if this is enough to solve the current financial issue, but it's a start.
The 50% tax on SS from Reagan goes back into SS, but the Clinton 85% tax goes into Medicare. Most likely fixes: 1) apply FICA above $250K and eventually convert to flat tax as cap increases from current 160k to 250k. 2) Raise FRA to 68 in about 40 years for late Millennials and beyond.
As I understand it, it could not increase the revenue enough by itself to qualify as fixed. While it would help, too Social Security is based only on earned income, and the wealthy earn significantly from capital gains (investments).
I just received my 2023 social security statement this month and there is a new paragraph, hidden on page five under the heading "Social Security will be there when you retire". It further states that my benefit will be reduced to $780 per $1000 of benefit in 2034. I am not a top tier earner. I was planning to retire in 2029 on $1726 a month as my primary source of income. That one statement has destroyed my confidence in them fixing the system.
Since you are already retired and wont be paying anymore taxes 7 strikes you fair because it is a a burden on some else. I am sure the people still working will not think it is fair to give the money they earn to you. How can you think a solution that benefits you and harms others is fair to everyone? OPtion 7 is an issue for the self employed due to double taxation and would hurt small business and entrepreneurship.
Remove all benefits for those who did not contribute (including non-working spouses). Place them on a different program that can be more tightly controlled and eventually phased out. No W-2, No SS!
Tracy from 1970 to 1990 I paid 4% to 6.2%? People today from 1990 to 2022 still paid 6.2% I think they can raise it gradually to 6.7% to 7% over 7-10 years
@@Satjr35031 KEY POINTS Social Security began spending more than it's earning in 2021, and this problem will only get worse. Benefit cuts are possible in the future if the government doesn't take steps to correct the funding issue. Workers and seniors should reduce their reliance upon Social Security as much as possible Here's what you need to know about the funding crisis the program is facing. It's no secret that Social Security is nearing a funding crisis that could threaten the financial security of millions of Americans who depend on it. But a lot of people aren't clear on what's actually causing the issue or when recipients will be affected. So it's time to clear that up. Why is Social Security in trouble? Social Security has three primary funding sources: Social Security payroll taxes: Workers pay these taxes on the first $147,000 they earn in 2022, and the first $160,200 they earn in 2023. This provides the bulk of the program's money. Social Security benefit taxes: Seniors with high enough incomes may pay federal taxes on a portion of their Social Security benefits. Interest earned on Social Security's trust funds: The government invests any money taken in from the two above sources that's not needed for benefit payments in government-backed securities. These earn interest over time, and that interest helps pay for future Social Security benefits. This system worked well for several decades, but things started going wrong when the baby boomers began retiring. This led to a larger number of seniors claiming benefits than ever before. And since the generations after them were smaller, there were fewer workers left behind to pay Social Security payroll taxes in their stead. Because of this, Social Security's payroll and benefit taxes haven't been enough to cover all scheduled benefits, and the trust funds have been slowly dwindling. Costs began exceeding total income in 2021, and if nothing changes, the program will eventually reach a point where the trust funds are depleted and it can't pay out all the benefits it owes.
@@Satjr35031 The United States' Social Security program is unraveling. Too few people are paying too little into the government-managed pool of funds at the same time too many people are taking too much out of that pool.
This needs to be a combo attack. Treat SSA as ordinary income for tax purposes (#6), #1. #2 (I see no line for COLA in Portland OR on my SSA Statement), #5 for all new folks paying into SSA done like the Government C fund, #7 raised by the CPI every year.
First thing that should be done is lift the cap! And with that obviously adjust the bend points as necessary so that the top earners don't end up taking more out than they would if the cap were not lifted.
Increase the percentage workers pay; increase the percentage companies pay by more (about 0.5% more). Also, increase the tax thresholds and change to private investment (a small percentage that increases a little more each year until a maximum of 25% is reached)
FRA needs to increase gradually every year until it reaches 70. Then allow us to delay starting until 75 with the same 8% increase. Also, allow those who want to retire at 60 with a 100% reduction from age 70. Taxing SS both when we paid into the system and again when we get those benefits is double taxation and is also very unfair
To me it's a no-brainer to increase the SS payroll tax rate a few basis points phased in over several years. And also significantly increase the contribution cap, then continue with annual increases of the cap.
The COLA couldn't be a year-to-year thing based on where you live. That would essentially trap folks in low-cost areas after a few years. Instead, just keep a national register of COLA "zones" and if you move, you get the new COLA amount.
Geoff: Great job as always. I think your correct about the option (#7 on your list). ALSO: I have heard great things about the Australian system . Have you done a RUclips on that system? Maybe we need a couple of options mixed together for a solution - we need younger folks to believe the Social Security System will be viable for them.
Be careful what you are asking for. Part of the Australian system is means testing. There is an income, and wealth, threshold that at a point you get nothing. My opinion is that you increase the FRA permanently and, on a temporary basis (legislation would have a sunset clause) a combination of the other suggestions. The one, and constant, problem here is politicians who first wouldn’t do legalization with a “ sunset clause “ and secondly, if they did they’d change the legislation prior to expiration. Since we are being forced to pay SS then it is morally repugnant to force a person the pay into a retirement system full well knowing they could not, essentially, never collect. If one considers that SS was never intended to be the only source of retirement income then you have the second issue. Retirement funding is like a three legged stool. One leg would be SS, the second a pension/401k/ IRA and third selling your primary residence and moving to a less expensive location and pocketing part of your gain plus have reduced expenses. There needs to be incentives to personally save more and also the elimination of incentives for the populace to rely on the government- being self sufficient. Simple modest saving, compounded over time could provide a reasonable retirement income, when combined with SS and relocation, for retirees.
@@Dottydawes Thanks. I did not do my homework on Australia - but I know we need our "leaders" to work out a fix. Yes folks should be more self sustaining -
@@Dottydawes It also has a required "superannuation" program where employers have to contribute to a defined contribution retirement account. Per the OECD: Australia’s Age Pension cannot be compared directly to benefits for the aged provided by other OECD countries, which are primarily aimed at income replacement. Australia’s Age Pension is a flat rate payment and redistributive in nature. It aims to provide Australian seniors with an income adequate enough to ensure a basic living standard. In addition to cash payments provided by the Age Pension, Australian seniors can be eligible for a comprehensive system of concessions and assistance for health, rent, pharmaceuticals and other living expenses. The Australian government provides taxation concessions to support private retirement incomes through its superannuation arrangements.
You forgot one that was the most obvious and that is the income limit on paying Social Security tax so right now as it is all those make over a certain amount I believe it’s 165,000 don’t have Social Security tax on any money above that amount so that means the higher incomes pay the standard 6% up to that threshold and after that threshold no more 6% That is the easiest and most obvious way to at least start correcting the problem
I like the idea, but believe it or not that won’t move the needle. People on this channel think about finances but over half of retirees do not. The mega millionaires and billionaires (those that could move the needle) get their money from capital gains which are not subject to FICA.
There are plenty of W-2 regular income earners that make well over $400,000 a year such as all the doctors and administrators at the hospital where I work at and I’m sure that would make a dent maybe not a big dent but if you made a bunch of dents by other ways it would have an impact
Good ideas. My thought is to allow employees to privately invest 2% of their FICA in an approved Social Security mutual fund, building that to 4% over a period of years. Then, slowly phase out the Social Security Administration over the lifetime of the existing recipients. The employer tax would remain the same and pay the debt off over a 50 to 90 year period. Most employees would have a private retirement fund by the time the SSA disappears that would exceed the current program. This is not an unusual system. There was a tax on telephones through 2000 to pay for the expenses of the Spanish American war in 1897.
except the days of employees starting and retiring with the same company are long over. I think the average loyalty is two years. what a mess that would be!
@@e-spy ...Not to mention how much more Wall Streeet could hold the Got't hostage. Courtesy of that "Citizens United" garbage, we already have enough of that!
So, let me clarify a couple of ideas. First, I use the word "privately." In my idea, the government only approves of a series of investment vehicles representing a range of risk. The employee would show proof of the investment or pay the 2% plus a penalty. Second, because this is a private fund, the employee would have complete portability and take it to wherever they work from McDonalds to a board room someday. Finally, all funds have risk, but the trend of the market over time is positive to the point that many insurance companies are writing mutual based insurance plans.
I think this solution is more fair. I also think that another possibility would be reducing benefits by 3% per annum until the program is phased out while implementing the new program
#7 for sure, Privatize Investing and cut spousal match. I think the Privatization option although a good one is really tough for an entity with the amount of investment funds of the US SS system.
Life expectancy is going down in this country, meaning the retirement years are shrinking. If anything, the full retirement age has to come down as a result. Isn't removing the earnings cap (I think it's 160K or something like that) the most obvious? It's a higher tax, obviously, for the top 10 percent of the population, but is it fair that the bottom 90 percent pays the tax all year, while the wealthy pay only part of the year?
Working class people's lifespan has always been lower than upper class people. It is getting lower. They die earlier so the low income people are subsidizing the better off. This is why I am against raising the retirement age. Someone who has done a life time of real labor, body is much more broke down in the early sixties than an office worker or other white collar worker. It is a fairness issue for me.
The 10 percent that pay Social Security tax on the full $160k have contributed more dollars than everyone that did not pay Social Security tax on the full $160k.
Correct. "Sweeten the pot" by regressively increasing the payouts as well. Eliminate the SS payout cap. I ommented on this above, but I haven't "checked my math" to see if it pans out.
1&7 would be easy to implement and has impact. Family benefits never made sense to me and not fair to the population (I am married with a child). This is money for people who paid into it, not for their spouses or to fund offspring in retirement.
Making the COLA subject to where you live punishes those who may have contributed the max for 35 years but may have decided to live in a low-cost-of-living location. How fair is that?
First order of business ....hit that like button !
You said it!
All ready did
What irks me the most is that our current batch of politicians seem content to wait until the very last minute before they attempt to fix this problem.
That's the way it got fixed in the 80s and that's how it will go this time-last minute fix
@@jmurphy644 You are totally correct. That’s the reality of our political process.
Our political process doesn’t reward bold leadership and advance problem solving. Elected officials who dare discuss the reality of our budget and tax policies are not rewarded by votes. They are often vilified in their next election. The Social Security system faced insolvency in 1977 and again in 1983. Changes were made at the last minute as they will be this time. The sad reality is that the changes would be less painful if we were to make them sooner rather than later.
One side wants to see it fail.
@@oldsesalt8496 I’m not meaning to come across as disrespectful, but I totally disagree. Nobody wants Social Security to fail. In my opinion, one side has locked itself into a no tax increase position to appease their voter base. This unrealistic position makes compromise very difficult to achieve. Fortunately, cooler heads will prevail as the day of reckoning approaches. Same as it did in 1977 and 1983. Social Security will not fail nor will existing beneficiaries see a significant reduction in their payments. Don’t spend sleepless nights worrying.
Mr. Schmidt, I truly enjoy your videos. Your breakdown of complex topics into small pieces that we can interpret is greatly appreciated.
Completely against raising the retirement age. Might be fine for people with office jobs, but for those of us who do hard physical labor, our bodies are pretty worn out by the time we get through our 50's.
At this point I am just hoping I can keep working until I get to 65 and am eligible for medicare.
Doesn't matter how much of a hit I am going to take retiring before 67 because I am not going to be physically be able to keep going.
Get rid of the income cap to start with. Not sure about raising the actual rate. I already pay considerably more into FICA than I do in federal taxes.
I agree about different jobs having different retirement requirements. For example in a military career a person can retire after only 20 years. But how would this be implemented for other careers. Not everyone in construction for example have physically hard jobs. Perhaps what is needed is raising the FRA but also loosening the definition of disability starting at age 62 and decreasing the disability rules until FRA.
Well, the issue is that people are expected to live longer, as the generations pass. Baby boomers life expectancy was at like 70, Gen X at 85, and Gen Z is expected to live to 100, according to one source. So like, they thought it would make sense to heighten the retirement age.... Now obviously it's not all the same for each country. Some people in the US love shoveling Mc D.s hurgers down their throats, and become unhealthy earlier. But generally, we are able to live longer if we actually take care of ourselves. This is the cause for concern when it comes to retirement age. If people are retiring earlier than they are supposed to, then that means we will be supporting them even longer in retirement. *The difference between a person who retired at 65 and dies at 70. 5 years retirement. Versus a person who retires at 65 years and dies at 100. That's like 35 years of retirement that social security might have to support them through.*
I'm all for them raising it, because of these statistics.
Oh, yeah, I forgot to mention that chosen job is a person management thing. People should look for something else to do if they know they are unable to do hard physical work. That's not in the governments full control. The government isn't the one choosing our jobs for us.
The government job is to manage social security.
if ou pay for social security yourself, which you do, there is no reason why you should not be able to retire once you have paid in an actuarially sufficient amount. hard physical work is not the only reason a person might want to retire before they are ready for the glue factory. the whole point of Social Security is that you paid for it yourself. for the first time in history ordinary workers could expect to retire while they still had a chance to enjoy it...becuse they paid for it themselves. before SS only the rich could expect to do that.
I would be willing to increase the amount that we can what the employer pays in 7.5% and raise the capital of 200,000. I watched Devin Carroll on RUclips and he says if they switched the formula from using wage increases to the CPI
I like option 7. My greatest fear- SS means testing to screw me out of my SS money for being a responsible retirement planner.
And that is the point ignored in this video: Government created Social Security during the panic of the Depression when everyone thought centralizing economic power over the people was the answer, and Social Security was one way to do that. The people were absolved of the 'hassle' of planning for and being responsible for providing for their own retirement. Politicians loved it because it gave them more power and control over the voters, as well as a way to occasionally generate fear through the threat of 'cuts' in order to get re-elected by pledging to protect the program.
No one seems to understand (although Schmidt hints at it) that the government promised a defined benefit scheme without resourcing it through investments that generate enough return to make the program sustainable. A pay-as-you-go system primarily dependent on always having substantially more workers than takers is a joke to anyone with a brain. But when politicians can't see beyond the next election and the people are willing to give up control over their lives, you get programs like Social Security, and everything else that makes the populace dependent on a central government.
You forgot another easy fix that affects very few people, raise the cap on maximum taxable earnings subject to Social Security taxes. It is currently $147,000. That means someone making $1,000,000 pays the same amount in Social Security taxes as someone earning $147,000, $9,114 for the employee and the employer. For the person making $147,000 that is 6.2% of his income. For the person earning $1,000,000, it is less than 1% of income.
But, the person earning income in excess of the SS wage cap also doesn't get additional credits toward their future monthly benefit amount. The benefit calculations only take into account the amount of income subject to SS taxes.
@@g0989 The benefit calculations include a cap on monthly benefits, so this solution would in fact increase funds available for all retirees.
@@g0989 I vote no. First, the threshold goes up every year. Second, your maximum SS benefit is capped so additional funds won't add to that contributor's benefit. Last, IMHO as a money manager, SS is one of the most poorly designed programs in history. I would rather a person use their money on landscaping, vacations, invest in their business, buy something for the house, invest in stocks (preferably the ones I own!) you know.... help build the economy rather than add an extra $50 bucks a month to your payment. The greater good be damned.
@@berardipeter I disagree
It’s 160,000 now and increases every year
As a self-employed dentist I have always grumbled about the 6.2 % times two because it increases my payroll costs and makes it hard to make a profit. I stopped grumbling when I turned 70 and started to receive nearly the maximum amount of social security benefit. I can work a little but still have a substantial income when my profit is added to the benefit received. Raising the percentage wouldn't be my favorite but I can see the logic.
You would have had 3 times more money if you would have saved it yourself.
@@TheRealEdStoner of course .... not an option for a nationwide system
@@TheRealEdStoner: Depends on how he invested it. Leaving it in the stock market for a full career, sure. But a big reason they HAVE social security is so few people save enough or consistently.
@@kevinkanter2537 if we educated people from K-12 about money it would be the overwhelming option.
@@rogergeyer9851 we should at least adopt the Galveston plan.
Loved the riddle! Raise the tax and raise the FRA. The more you spread the solution out among the possibilities, the better. Small tax increase, small FRA increase, small COLA etc = large positive impact on the Trust.
#7 is the best option but I think you left out an option that would work well in conjunction with it and that is to eliminate the cap on the withholdings.
I hear you. The number of people who receive income above that amount is shockingly low. The mega rich decamillionnaire and billionaire types (whom we think about as the obvious offset) got that way through capital gains on their businesses for the most part. Don’t get me wrong, it will help a little, but not the way one would hope for
@@HolySchmidt true, but it could reduce the amount we expect our children to carry in option 7, which I agree is the most probable solution. It would mean perhaps 8% vs 10%. With today's wages not keeping up with inflation, that seems unfair to me.
@@HolySchmidt According to the social security website, about six percent of workers exceed the limit. I’m imagining if they raise the ceiling to around $200k that would generate quite a lot of revenue.
I used to agree with Geoff that the revenue collected would be small, but looking at the latest BLS wage statistics, I'm not so sure. Total payrolls are about 8 trillion. If about 5% of this is over $150K, then an additional $50 billion would be collected, on top of the $1 trillion currently paid - that's a 5% increase. It's not much, but it's more than I originally thought.
@@vinyl1Earthlink good job actually running some numbers on that.
I think a combo of increasing the tax rate and uncapping the upper limit earning of the tax is the most likely scenario.
Easiest way to fix SS would be to cut benefits. Greedy seniors are the problem
@@tomblevins5020….. That is incorrect.
@@July.4.1776 We all paid in almost nothing. In my case about $200,000 matched by my employer. I will collect in 3 years when I turn 70. I will collect about $56,000 per year. In less than 4 years I will get all the money I paid in back. Benefits are too high.
@@tomblevins5020 You are not factoring in inflation over all those years. Why do you seem to think seniors are all greedy? I'm 73 and living on $1,500 a month SS; that will cover a small, crappy apartment in an undesirable part of town in a low-cost state. I still have to eat and all the rest with serious medical bills. However, I tried as best I could to plan for and save for retirement; I have less than $350,000 now which returns not so much these days. It's not much, but I have no debt at all, a fairly new car, a small 15-year-old custom house (paid for) I had built on 5 rural acres and just hope that I will be alright.
The percentage of rich, middle class and poor seniors is the same now as that of the general population. I was endlessly grateful for SS and Medicare when I took in my 88-year-old grandmother when I was 28, a single mom, divorced with a minimum wage job and trying to make my way in the world for the first time; I had no money to support her as I was struggling myself. Those programs sustained her, a minister's wife who lived as frugally as possible, for decades. Why are you not able to see the full picture?
I agree. Slow, incremental increasing of the tax rate and definitely removing any notion of a cap.
Been saying for many years: Eliminate the salary cap contributions.The limit now is ridiculous.147k.Everything else is off the table.Married couples bringing in 6 figures will contribute greatly. That is is the answer and has been talked about for years but nothing serious has ever been discussed.
Sounds good but in truth only about 3% make over $150,000 and drops to 1.5% over $200,000
A combination of changes so that almost everyone has a little skin in the game. Raise or eliminate the withholding cap. Increase the payroll deduction. Eliminate the dependent child benefit for retired workers receiving Social Security (I know retirees who have moved to the Philippines and knocked-up young girls and now receive 50% more in SS benefits). Reduce the spousal/survivors benefit for higher incomes or make the full amount of their benefits taxable after $50K or so of income.
I know this happens, and it irritates me as well. However, I think there is a percent limit so that a fixed "pool" of money is split between the minor beneficiaries. In the example I read (also from the Phillipines), the kids split $1,500. If another kid got added, the same $1,500 was just split between more children. (Or people. I think the kid's mom also gets in on the pool because she has to stay at home and be the caretaker. I am not sure about this point, but that sticks in my memory.) So do we have a bunch of old guys that have figured out how to make themselves more attractive to some younger chick? Kind of a monetary equivalent of a yellow Camaro?
Also, I don't think the children actually have to be his. I think he can marry the children's mother and adopt the kids and voila, this new family gets more SS benefits. Ain't America grand!
BTW, I am not an expert on SS, so maybe I am not understanding this correctly. Maybe someone will understand this better and can enlighten us. Just seems like a stupid thing to do when the system is running out of money.
Get rid of it. The SS recipient who gets $1,700/month, would have received $10K/month if the same money was put into a safe mutual fund from age 25-65.
SS is a NEGATIVE return.
And they could choose which heir would inherit the balance. Adult child, charity, whatever. The present rules penalize workers without survivors deemed worthy of survivor benefits according to an antequated system. It's not 1930 anymore!
5 and 6 look good. Also, eliminate the cap on SS witholdings, but (regressively) eliminate the cap on payouts. just as an example, 12% from 6721-8334, 9% to 10, 417, 6% to 14,584, 3% to 20, 834, and 1% above this? Also, if a Corporation pays an exec in stock, they must pay 6.2% FICA on the value of the stock at the time of payment. The Exec too. They can pay that annually, at tax time.
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Sorry, but taxing your Social Security benefit because you're considered "wealthy" is just dumb. The current threshold for a married couple is $32K. I don't know any married couple who makes over $32K, collects Social Security, and lives in a mansion or drives a Bentley. That Reagan era cap should be adjusted or removed. Social Security benefits were meant to be tax free and should remain so - or - raise the threshold to something more reasonable.
Thanks for the comment SFT
Option 7, the 6.2% hasn't changed in over 30 yrs but the maximum earnings subject to the Social Security payroll tax has gone up from about $50k in 1990 to $160k today.
Cut benefits by 50% Greedy seniors are collecting too much
@@tomblevins5020SHAMEFUL! I cannot believe your stupidity
Other countries pay more like 50%
@@rusted5408 What is your point? Benefits in the U.S. are too high. Greedy seniors should not be supported by their children. They had decades to save for their retirement.
@Tom Blevins if you feel that way then just don't take your benefits when you retire. It's a free country. But I paid for the seniors while I worked so you can pay for mine now. Oh. Wait
Surely you're a sucker, not a giver. You live off the system.
Option #8 is to cut Federal spending by, say 75% to pick a nice round number, and to put the savings into SS. The people who make money off the government have done so long enough. They can take a pay cut or else use their great skills to find a productive job.
I like this option best!
Jeff, did I miss you talking about the option of removing the income earning cap where today SS tax applies up to the first $147,000 (cap), beyond this there is no SS tax?
Yes, why was that not even listed as an option? Why should high earners pay a lower percentage of their earnings than the rest of us?
@@newenglandgreenman Because their benefit is also capped. If you remove the cap on the contribution then you need to remove the cap on the benefit.
@@kennetzel6101 No. You don't.
Honestly, you should be allowed to opt out of social security completely and get 15% higher wages every year and go your own way. It's just a massive grift as it exists now
the cap is set because that's where the tax would cost more than the benefits are worth. raising the cap would be like making a millionaire pay ten dollars for a loaf of bread that costs the ordinary worker one dollar. the rich already pay more than you do, and get back less as a percent of what they paid in. that is what enables SS to pay the poorest workers more as a percent of what they paid in. "percent of your earnings" is not the only way to measure fairness.
A small adjustment to to payroll tax solves the problem. Going from 6.2%to 6.25 % takes it a long way. If you take the cap off and add a forth bend point for high earners they pay more in and still get more back using the same system of the bend points. I never had an issue paying into social security as I watched my grandparents and parents collect it knowing full well my day will come when I will collect just as the grandchildren will collect some day. Social security is not an entitlement as I have paid into the system for over 40 years from my first job actually I am still working and paying into the system.👍
If you are forced to pay into the system then it is an entitlement - but one that a corrupt government can take away.
@michaelk969 Forget the "entitlement " bs. An entitlement is any federal payment that is authorized/ entitled by a law.
One solution you didn't mention is adjusting the income cap on Social Security tax. Currently I believe this is $147,000. Any annual income above that is not taxed for SS purposes. Removing or adjusting that cap could provide more income for the trust.
Thanks for the comment Vance.
But then the amount that those people get would also increase.
@@Mark.Taylor. Agreed. See my similar comment above.
@@MJFisher76 Interesting. I have never seen that point in the many discussions of this I have read. So that begs the question, would that greater return to top earners offset what they would contribute or would there still be residual benefit the the trust?
@@vancepiccin1711 Obviously the "Math" would have to fix the problem, or do so in combination with another of these solutions. Changing the retirement age spreads to 64 minimum, 68 FRT, 72 max is another idea.
Should be all of them but in moderation for each one. That way the impact is sort of smoothed out across generations and income levels.
Nice video. I am just about to start collecting social security at the end of 2023. I think a combination of your suggestions could be better. A little pain for everyone to save social security. What ever is done it needs to take everyone at every age into consideration. Fairness for young and old is important. Thanks very much for the video.
Combine reductions with a small increase in the Tax, combined with adding: 1. Reduced bend point between the 32% at lets say $5,000 to $6721 to 30% and then reduce the 14% to 12%. 2. Also increase the minimum age to 62 (it is 60 for widowers and widows survivor benefits. ), 3. Allow 25% of the Trust to be invested in AAA+ Corp bonds and I think that would get us there with the minimal pain. 4. Give the trustees more tools to adjust the program vs now it take an Act of Congress to make changes.
Option 6. Raise the threshold level. OPtion 7 is an issue for the self employed due to double taxation and would hurt small business and entrepeuneurship.
won't hurt. it's just the cost of eating when you are too old to work. you make more money after paying SS that your grandparents dreamt of.
self emplyed tax is not double taxation. you pay for SS the amount that will pay for your expected retirement. for not self employed, it is considered necessary to require the employer to pay half the necessary, otherwise they would not pay the employee enough to "pay for it himself." as it turns out many eonomists say the "employers share" is really the employees money. don't trip youself up playing the "sister got the biggest piece of cake" game. the system is completely fair and does what it needs to do.
You pass those costs on to your customers onto Society as a whole
A combination of eliminating the cap, raising the minimum age for both early and full retirement age, and raising the payroll tax rate gradually to 7% would secure social security for many decades to come. Wish someone would grow a pair and get to it already
Regional COLA means there needs to be a regional SS tax
the chance of that getting thru congress is minus one billion
Yes, that's a terrible idea. People would be locked into staying wherever they live. If I collected less than CA people for 10 years, I would be less able to move to CA because I would have less savings than if I had collected the same amount all along. (probably) Plus, they pay more to live in their nice climate; why should I subsidize them?
actually, basing the tax on earnings, and the benefits based on the tax paid automatically takes care of the different regional cost of living. since the payout is progressive, working in a low wage area then working in a high wage area is at least partially compensated by the higher benefit rate to lower wage workers.
Eliminate the earnings cap on social security taxes (currently $160.2K). However, only tax the income above the current cap at half the rate (3.1%) that the income below the current cap is taxed.
Bingo! I’ve been saying this for years. Short sweet and effective!
Of course congress would debate and form 300 committees to find a “comprehensive “ answer
and dish out sound bites every 2 minutes. No wonder everyone hates politicians.
In all likelihood, I agree, #7 is going to probably happen. It's sad though, our country as a whole is unwilling to accept responsibility for a bad policy and instead (again) saddle the bill onto the next generation.
actually, you pay in advance for your own benefits. so does the younger generation. just like a savings account.
Geoffrey, can you address how doing away with the maximum wage cap of $160,200 for 2023 and higher in future years might strengthen SS. How do we get our politicians to look at this option to save SS for future people who want to retire. I believe everyone should have answers. We ALL should pay into SS no matter what your wages, it’s only fair.
Social Security was never intended to be anyone's only source of income in retirement period.
Yeah, but sometimes life happens..
That may have been true.But the fact is,for most people,it is,their only source of income.
I am cool with them raising that tax rate personally. What I really think they should do as well - even though it would hit my wallet personally - is to remove the ceiling. Make a 4th, absurdly low bend point and continue taxing those of us making over the current SSN limit. Folks like us are the ones who need that money the least, and I would rather see social security continue and be (very) minorly inconvenienced now if it would save the program.
#7 makes sense, combining it with a variation of one or two of the other options would make even more sense. At a minimum the Payroll tax % should be adjusted either annually by a fraction of a percent or at least be subjected to a mandatory review every so many years....30 yrs is a long time to wait.
exactly. one tenth of one percent per year would do the job...that's about a dollar per week per year until the increase is 2%...by that time your real income will have increased by 20%.
Fixing it continually, raised from 148,000 to 160,000 which translates to many households pay an extra 1200 in SS tax withholding and rising every year. It’s gone from 60,000 to 160,000 in a short period of time. Why it this ignored in the SS conversation. It’s a annual tax hike on workers every year.
#7, the answer that doesn't annoy anyone, except for those paying the bill. Kinda surprised it hasn't been raised in over 30 years. Politicians love a good quick fix that didn't cost them anything.
but all politicians are now in love with the idea that they personally will never raise taxes, they are quite willing to double spending but wont take responsibility for raising taxes. and they are stupid enough that they dont see any problem with these two things.
7 won't happen because the corporations own the govt.
Also they'd be idiots to do it, because it'd basically be shooting the mouth that feeds you.
the tax was raised enough in 1983 to enable the boomers to pay for their own retirement like every other generation has, but the boomer generation was too large for pay as you go to be fair. that raise has done its job. now we will need another raise to pay for our longer life expectancy. you won't like working longer into deep old age, even if you are going to live longer. it's not just a matter of hard physical labor. since you are paying for it yourself, you should be abble to retire whenever you have actuarily paid for it, SS enables poorish people to retire...something only rich people could do in the past.
@4:20, by reducing the two tiers even more, one is making Social Security an even greater wealth transfer than it already is. It suffers from the same sort of inequity as the regional COLA issue where workers who had to pay the same percentages of their income in FICA Social Security taxes, but get a proportionally smaller monthly benefit.
Sorry, the bend points already make Social Security an unfair system, and this proposal just makes it even more unfair.
Thanks for recognizing this.
I opt for #7, however instead of increasing the tax rate, there should be no cap on withholding of salary, or increase it to $300000 for single and $500000 for married joint filers, right now it is cap at $147,000. Upper management hit the threshold in mid-year right away
$160,000 next year You have to keep everyone’s work history separate
I think the cap is fair. They cap the payout, it is only fair to cap how much you pay in. Otherwise it is just an income redistribution scheme.
Always enjoy your video’s. Such great information. Your riddle was the best! Thank you for putting this information out to all.
Thank You for a very informative presentation. I think it will be a combination of some sort.
Thanks for the comment RFR
And that’s where the real issue is. All is based on political security and not what is best for the citizens. Government never produces anything that’s effective or efficient.
Remove cap on income taxed for social security.
the fundamental problem with all these solutions is you are changing the rules of the game mid way through, and putting these solutions in the hands of the folk (government) who broke it to begin with. So all of these solutions just cost the tax payer more money with less payout at the end, and for those of us who have been being taxed for over 30 years already it's hard to have faith in a good outcome for us. Good video, great points and insight....just a grim preview of what's to come.
Demographics did this.
congress wants to change the rules. the simple, honest solution is just to raise the tax--the amount you save--enough to pay for the extra years you are expected to live. increaing the tax about one tenth of one percent per year--about a dollar a week per year for an average earner--will do the job.
I think increasing the 6.2% rate isn’t reasonable for young people as they are already struggling. Removing or reducing the gift to those already making higher salaries by increasing the income ceiling makes the most sense, but business will push back. With record profits, they don’t have much of a case.
Did you forget we paid 4% in early 70 and we struggled
@@Satjr35031 We did but just because we struggled doesn’t mean the next gen has to struggle more. They are paying a higher percentage with lower earnings and many have student loans.
@@theresarowe1656 I can see your point that we struggled But we had student loans too and made a lot less than todays wage earners plus the 6.2% has been in effect since 1990 over 32 years ago
@@Satjr35031 Just because something hasn’t been increased isn’t a valid reason to increase. When does it end? 25% 50%? I didn’t have student loans because I could pay by working; not possible now.
66% first-time bachelor’s recipients borrowed for their educations in 2007-08, up from 49% in 1992-93. And way up from 1970.
@@theresarowe1656 how much money do you think people made in the early 70 We paid 4% but gradually that got raised to 6.2% in 1990
Somebody should forward this video to congress. Since they can't figure it out maybe they can get an idea from this guy. So simple.
Hey Geoff! What about your riddle in the beginning? The “making 7 even w/o addition, subtraction, multiplication, or division.”? Remove the “s”?
Thanks for this video-makes total sense. Also, I didn’t realize taxes I pay on 85% of my SS go back into the program. I feel better about that.😊
Susan, “seven” minus the “s” = even.
While I understand the answer, it is subtracting the "s" from the string of letters :)
I personally don't feel good about paying ANY taxes into Social Security.
I'd never suggest we do away with the program. But let's do away with the mandatory contributions. Let people decide if the program is well run and serves their needs instead of forcing every worker to contribute from 6.2% to 12.4% of their earnings.
If the program provides a good return for the contributions demanded, people would opt-in.
If you have to force them to pay into it, how good is the program?
When you increase payroll taxes, remember that employers (small businesses, too) have to shell out more and that will increase prices. McDonalds has to pay higher wages and therefore more payroll taxes making people freak out because a hamburger is now 12 dollars. It is all relative. If this country would just take a year and only concentrate on it's taxpayers, instead of all the other countries in uproar, the problem would probably fix itself. We can't keep spending on everyone else in the world and ignore our own home citizens.
Reforming the SSD portion of Social Security and either tightening up eligibility or paying for it through regular taxes is an option as well.
The problem lies with the SS Fund, not with the separate SSDI Fund.
@@SandfordSmythe Not true, The SSD is funded through SS. It does not have its own funding. There have been plenty of reports that SSD is hurting SS and to some degree, the number of people applying and receiving has increased over the years....another reason why SS has gone from 1% to 6.2%. Government keeps adding more benefits.
@@berardipeter They both tap the FICA money in different proportions, and they go directly into separate funds. The split is changed to reflect the needs of both, and it has gone either way over the years. Right now the reserves of SS Old Age will only last a few years, so funds from the SS Disability fund will be diverted to back it up.
Remove taxable limits on income so they continue to pay a percentage for their entire yearly income instead of these cut off income limiters of course this might not be needed if the fed ever re-payed the IOU's they made to Social Security when they took monies out of it for the general fund.
I like option 7. It’s hard to imagine a tax rate not increasing for 30 years. It’s also hard understand why wages have been stagnant for 30+ years.
HDDynaRoy: They wages haven't all been stagnant for 30 years. It depends on the type of job, etc. Staying in jobs that are in decline and being unwilling to learn or change is a BAD strategy for maintaining wage growth, but many people do that.
Maintaining the same tax rate brings in more money as wages and the tax base grow. The problem is that SS, like a Ponzi scheme, always depended on an ever increasing payer base which we do not have with a negative growth birth rate. The government needs to control spending which they just proved they cannot do with the $1.7T bipartisanship omnibus. The govt paying able bodied workers over $100k/yr in some states to stay home, like my massachusetts, is not a wise move.
@@rayraycthree5784 how do I get paid $100k to stay home?
@@hddynaroy1111 Learn to write computer software.
Why? With inflation, tax receipts go up, so it's not like more money is not coming in.
I see it the other way, there is no reason to increase tax rates if the program is well designed and well run .
Politicians who say rates need to increase due to inflation are hoping you don't recognize that incomes also increase.
The only taxes that may need to be tweeked are excise taxes that are fixed dollar amount per unit of good. I.E. gasoline taxes that are so many cents per gallon. They don't adjust for inflation. But taxes that are a percentage of a value do rise as that value rises.
The other factor to take into account is that at the average life expectancy the first year baby boomers were born (1946) will on average die in 2024. Each year after that another group will pass. The bubble needed to fund Social Security will have passed through the system by about 2042. The adjustments you mention are still needed but only for a short period of time. And although the following generations are smaller they are not a huge drop in the US like they are in most of Europe, Japan and Korea.
exactly
I think that we have our representatives invest in the stock market because they all have miraculous returns on their investments.
Cost of living in GA is a heck of a lot higher than the 8.7% increase. You must live in California or New York.
Great video, I suggest they nudge up the tax rate, nudge up the maximum and gradually extend the retirement age to 68
What age group should be affected and adjusted by this change?
@@raymccarty4612 haven’t studied the question, but everyone earning wages would be a good starting point for analysis.
@@raymccarty4612… Everyone below the adjustment point. Much like it was set up in the 1980’s
Sadly what’s also being discussed in Congress is applying means testing to social security. Adding all of your annual income together (Social security payments, wages (if any) 401K and IRA distributions including RMD’s, pensions, interest and dividends and proceeds from stocks) if your total income exceeds the limits imposed, your monthly social security amount will be reduced or even entirely eliminated. The annual income maximum that is currently being discussed is $80,000 Apparently this means testing would apply not only to those who will be applying for Social Security in the future but to current recipients as well. It would be done each year as part of filing your income taxes. So in effect your monthly social security payment would be adjusted annually based upon your income level. Those that saved for retirement would immediately be penalized for the money they saved, by having it reduce (or eliminate) their monthly social security benefits. Let’s hope congress chooses a different method or we are going to need Jeff to create another video entitled “What to do when your retirement plan goes up in smoke and it’s to late to do anything about it!”.
Need to raise the ceiling on income that can be taxed. Easiest solution, can’t believe you didn’t include that. Love your videos, keep them coming
Probably because only 2% make over $150,000 a year Not enough of people SS currently pays out over $100 Billion a month
I did not read all the comments but agree that raising the tax rate would be quickest solution.
Opt. 7 seems most reasonable, fairest and fastest repair. Without this option having been used in the past (as it was referred to) all current recipients would be in trouble 🙂
Sure, just put the burden on everyone who is still working. So basically tax the younger generation more.
@@chesshead3943 Yes, exactly.
It's not fair to anyone that has to pay the tax.
All you're going to do is make the problem worse. The problem with social security is DEMOGRAPHY, not a question of taxing young people.
If you tax young people more they can't afford to have as many kids and the population contracts and you get the Japan death spiral
As a younger person, I think the fairest place to cut would be benefits over a certain amount, as well as ratchet down the benefits, far before we cut costs.
Whatever happened to people caring about future generations?
Retirees need to sacrifice, otherwise the young will just get even MORE economically radicalized and tear down the whole system
As a high earner self employed person nearing retirement, SS payments were big part of my tax liabilities
bc we have to pay double into the system. I don’t appreciate young people making comments about all
the old people are bankrupting the country…, what I’ll receive from SS is extremely low compare to
what I paid in over the 35yrs of my contributions!! 🥵😳 just saying!
Of course all of your solutions are viable and make perfect sense. However maybe it would be best to have very small adjustments to all of the above. If we only have to delay full retirement by say, another month, that would be far less painful than an entire year. Similarly raising the payroll tax .1 or .2%, and raising the taxable Social Security income by just one or 2% would have a very powerful effects as well.
That would be very sensible.
They could start raising the FRA right now by one or two months each year until it got to 68 ish. There really wouldn't be that much pain to anyone involved; including politicians worried about re-election.
You forgot one option. Increasing the maximum income that is subject to social security taxes.
What about taking the cap off of SS tax on the yearly salary? I think this year it was roughly $150K. So once that amount was earned the wage earner paid no more SS taxes for the year. Maybe that would only put a small amount in the SS coffers but every bit counts.
Not too many people make over $150,000 Not figuring in people with large Capital gains
I agree that simply raising the social security tax to 7 & 7 % or so would be most palatable perhaps augmented with phased increases on taxes to distributions (up to 100% as taxable income).
Correct 👍
I think a combination of three of the things you suggested would be best. Increase FRA to 67.5, allow privatized investments, and increase payroll taxes slightly. That combination would soften the blow to everyone and really prop up the system for many years.
Good point Jim
Jim Owens: No one is stopping anyone from making all the investments they want, to prepare for retirement. If people would save and invest responsibly, only the sick and very low income would need social security.
@@rogergeyer9851 Good point. I have never earned a lot of money, but I have always paid myself first. And when I began my journey toward retirement, I followed the literature published by the federal government. Yes, I went to the library and read the literature. In those days the government encouraged us to manage our individual retirement accounts alone without the aid of a personal financial planner. So I did that, too. I will never acquire the very high skill and knowledge level of Geoff Schmidt, but I get the basics. Save and invest. Look carefully where you place your money. Index funds are the lowest cost and the easiest to manage. If I can do this, anybody can.
I like this, too.
Increasing the payroll tax is the only option that does not affect those currently receiving social security and that was one of the huge arguments with the plan
I think a combination of things would be the best option because each could be smaller than if a single one was chosen. Increasing the tax rate and increasing the age of FRA and increasing the payroll cap, while possibly decreasing the rate of increase of benefits, or reducing associated benefits while keeping the primary recipients the same. Small changes are easier to take than a single large change.
The thing I don't like is the suggestion of putting Social Security into the annual budget shennanigans and subject to political games that some politicians on the right have suggested. I think it's good that they are starting to think about it though because small changes made sooner are better than larger changes at the last minute.
I think the right wants to uproot social security.....one of them said it during his campaign
Why not increase the earnings cap for SS taxes? Or remove it?
So it all comes down to more taxes and less benefits. Sometimes the benefit reductions are tricky, like making you wait an extra year, but it's still a benefit reduction. It will be decided based on votes. There will be a lot of old people and few workers, so of course, soak the workers and make it even less worthwhile to work, damaging the economy even more.
Best solution? Give everyone their money back, end the program and let people be responsible for themselves. I could take the $500,000 me, the wife and our businesses have paid in and buy enough rentals to generate three times more money than we will ever receive from Social Security.
And the government would still win, think about the interest the government has made on that $500000 over 40 years. Pull up a interest calculator with the average 5% returen on government bonds over 40 years and tell me what we come up with, then multiply that times 70 million people collecting right now. ($ 500000 with 5% interest for 40 years would amount to about $1.5 million ) ( Some one in the government has their hand in the cookie jar )
Option 8 Remove the yearly cap......Done...
Will not generate enough Only 3% make over $150,000
Frankly the limit on income subject to Social Security tax should be lifted from $160,200 and removed completely. That would go a long way to funding the program for everyone.
It would help those at the lower economic scale at the expense of the wealthier. It is neutral now, where everyone gets their benefits based on what they paid in. I think that is fair.
Thank you for your informative video. We also got a dad joke!
Lol. I’ve got a million of them!
@@HolySchmidt As do almost all dads! 😎
Here's a novel idea, how about the entire government STOP spending our tax dollars like drunken sailors? Both parties are guilty of this and act like it's a contest to see who can waste our money the fastest! How about a pay cut for any politician who proposes to raise or create new taxes? And maybe consider raises only for those who have found a way to SAVE money? Unless we get spending under control, it won't be long until we are the country who used to be the dominant country in the world! If politicians would try to be efficient like major companies do, we wouldn't always be worrying about running out of money! Both parties got together to pass the 2020 Secure Act which has essentially stolen our ability to pass on most of our hard earned money to our own family! Where is all those $billions or $trillions of dollars headed? And they're already playing with it again (though not as bad) in a 4500 page last minute bill that very few if any could have possibly read! God knows what else they put in it! 🥵
Yes!!
While I am not looking forward to more taxes, I think that #7 is the most likely.
To reduce the gross percentage increase, I would remove the income cap on wages subject to Social Security tax. I would go to 6.4% for each side (employer / employee) for a total of 12.8% SS tax. This would make our total SS+Medicare taxes 14.05%. If you remove the cap at the same time, and combine that with a phased in increase to the FRA to 68, you will get very close to a sustainable system.
Not enough of an increase Has to get to 6.7-7
@@Satjr35031 That is a substantial tax increase. When I was doing the math, I did not see a need of quite that much. When you remove the cap subject to taxation, the two combined were substantial. It may need another .1% or so to 6.5% on both sides, I believe you hit the numbers needed. I could, of course, be wrong.
@@Timothy_Smith Look at it this way Someone making $100,000 a year would pay $500 more a year at 6.7% When I started it was 4% I survived
@@Satjr35031 Oh I know that it is just a little bit more...But we do not need to increase taxes to that level. Congratulations on surviving with a much lower level of taxation - a lower level of taxation would certainly be nice.
We need to do one of two things:
Cut total benefit spend (eg. increase FRA) or increase taxes, or both to make the system work.
IMO, both need to happen, but not to the level you suggest.
@@Timothy_Smith Like I said mine went from 4% to 6.2% not asking much to go to 6.7% or 7% from 6.2%
My two favorites are increasing the payroll tax and taxing all income, not just the first 400k. All the other ideas are horrible.
They only tax it to $160,000 currently.
What about raising the maximum taxable earnings (e.g. $167,000 in 2023) to unlimited (the same as for Medicare taxable earnings) and adding another bend-point to the PIA calculation instead of making arbitrary increases to the maximum taxable earnings every year? This is effectively a variation of "3) PIA Rebalance", and it's still unfair to high-earners, but a little less so with an additional bend point.
Take the limit off, and set a maximum benefit of the median family income. Same basic idea, collect more from the million a year crowd, but not end up paying the 15% ($150,000/yr) that last bend point would give them.
I believe high earners already pay an additional tax on Medicare from the Affordable Care Act
They should have raised it sooner from 1990 at 6.2%. Having no raise in 33 years is ridiculous and especially so when they knew the baby boomers would be coming along. A relative and I were discussing SS about a year or so ago. Upon its inception, the average American lived to 65 so they were on getting it for three years. Based on the internet, they aledge that the average age is 82/m and 84/f now. Based on that, there has been more strain on SS funds also.
you cant base anything on "the internet" without being more specific
I was curious what percentage increase was needed to balance the fund (assuming no other change was enacted). The 2017 SSA report had this: "Social Security has a long-run actuarial deficit of 2.83 percent of taxable payroll, according to the 2017 Trustees Report. This means that the deficit could be closed immediately if tax rates were raised from the 6.2 percent paid by both workers and employer (a total of 12.4 percent) to 7.7 percent each (or 15.4 percent in total). In other words, the deficit would be eliminated if workers and employers each paid 1.5 percent of wages more in Social Security taxes." Sounds a bit steep to me, so I am guessing a combination of the changes mentioned will be done.
Hi CD. Thanks for the idea. Close to getting your first social security check now!
@@HolySchmidt Hah! Two weeks and Operation Payback will begin!
The problem with raising the tax rate is that it hits the poor the hardest. It's a regressive tax.
I suppose you could use the earned income credit to offset the SS increase, but then you are just taking money out of one pocket to put in another.
Personally I would increase both the FRA and the early retirement age one year using the same two months per year system now in effect. And I would also take the limit off the income subject to the SS tax, every dollar would be taxed at the current rate. The last thing would be to put a maximum limit of the SS benefit. There already is a maximum benefit for some combination of benefits, but I don't know details. I found out it won't affect me and I lost interest.
@@chessdad182 for how long? Today politicians can make a partial increase and thus kick the can down the road. I think the number you ask for is roughly 17% combined, and it may be slightly higher, but it is roughly 17% ( 8.5% each side)
@@mikespangler98 Agreed. The only fair way to minimize the impact of the poor, which is what SS is all about, is to eliminate the wage cap when deducting for OASDI from a paycheck and change the bend points that only affect the 32% and 15% range (e.g. make the 32% range half the size with the higher half like 12% and make the 15% range like 7%). I don't know if this is enough to solve the current financial issue, but it's a start.
The 50% tax on SS from Reagan goes back into SS, but the Clinton 85% tax goes into Medicare. Most likely fixes: 1) apply FICA above $250K and eventually convert to flat tax as cap increases from current 160k to 250k. 2) Raise FRA to 68 in about 40 years for late Millennials and beyond.
Someone please explain why raising the taxable maximum from its current $160.2K isn't a viable solution.
As I understand it, it could not increase the revenue enough by itself to qualify as fixed. While it would help, too Social Security is based only on earned income, and the wealthy earn significantly from capital gains (investments).
I just received my 2023 social security statement this month and there is a new paragraph, hidden on page five under the heading "Social Security will be there when you retire". It further states that my benefit will be reduced to $780 per $1000 of benefit in 2034. I am not a top tier earner. I was planning to retire in 2029 on $1726 a month as my primary source of income. That one statement has destroyed my confidence in them fixing the system.
Since I am already retired and won't be paying anymore payroll taxes, no. 7 strikes me as very fair. 🤣
Dennis Kirschbaum: Yup. Just like low earners LOVE the idea of sock it to the high earners re taxes. Funny how that works.
@@rogergeyer9851 it's always easier to say tax someone else than it is for folks to voluntarily write checks to pay more to Uncle Sam.
Since you are already retired and wont be paying anymore taxes 7 strikes you fair because it is a a burden on some else. I am sure the people still working will not think it is fair to give the money they earn to you.
How can you think a solution that benefits you and harms others is fair to everyone?
OPtion 7 is an issue for the self employed due to double taxation and would hurt small business and entrepreneurship.
Sure it is. 48 percent count on it because they didn't make the proper life choices and made every excuse to play the victim.
Remove all benefits for those who did not contribute (including non-working spouses). Place them on a different program that can be more tightly controlled and eventually phased out. No W-2, No SS!
Cut benefits! Seniors had their entire working lives to save. Our kids should not be supporting us!
We're already facing a worker shortage so trying to force more taxes on future generations we'll end up needing SS reform again.
Tracy from 1970 to 1990 I paid 4% to 6.2%? People today from 1990 to 2022 still paid 6.2% I think they can raise it gradually to 6.7% to 7% over 7-10 years
@@Satjr35031 They would still end up reforming Social Security again with a shrinking workforce, what part of that don't you understand?
@@Satjr35031 KEY POINTS
Social Security began spending more than it's earning in 2021, and this problem will only get worse.
Benefit cuts are possible in the future if the government doesn't take steps to correct the funding issue.
Workers and seniors should reduce their reliance upon Social Security as much as possible
Here's what you need to know about the funding crisis the program is facing.
It's no secret that Social Security is nearing a funding crisis that could threaten the financial security of millions of Americans who depend on it. But a lot of people aren't clear on what's actually causing the issue or when recipients will be affected. So it's time to clear that up.
Why is Social Security in trouble?
Social Security has three primary funding sources:
Social Security payroll taxes: Workers pay these taxes on the first $147,000 they earn in 2022, and the first $160,200 they earn in 2023. This provides the bulk of the program's money.
Social Security benefit taxes: Seniors with high enough incomes may pay federal taxes on a portion of their Social Security benefits.
Interest earned on Social Security's trust funds: The government invests any money taken in from the two above sources that's not needed for benefit payments in government-backed securities. These earn interest over time, and that interest helps pay for future Social Security benefits.
This system worked well for several decades, but things started going wrong when the baby boomers began retiring. This led to a larger number of seniors claiming benefits than ever before. And since the generations after them were smaller, there were fewer workers left behind to pay Social Security payroll taxes in their stead.
Because of this, Social Security's payroll and benefit taxes haven't been enough to cover all scheduled benefits, and the trust funds have been slowly dwindling. Costs began exceeding total income in 2021, and if nothing changes, the program will eventually reach a point where the trust funds are depleted and it can't pay out all the benefits it owes.
@@Satjr35031 Social Security needs a complete overhaul.
@@Satjr35031 The United States' Social Security program is unraveling. Too few people are paying too little into the government-managed pool of funds at the same time too many people are taking too much out of that pool.
This needs to be a combo attack. Treat SSA as ordinary income for tax purposes (#6), #1. #2 (I see no line for COLA in Portland OR on my SSA Statement), #5 for all new folks paying into SSA done like the Government C fund, #7 raised by the CPI every year.
First thing that should be done is lift the cap! And with that obviously adjust the bend points as necessary so that the top earners don't end up taking more out than they would if the cap were not lifted.
Increase the percentage workers pay; increase the percentage companies pay by more (about 0.5% more). Also, increase the tax thresholds and change to private investment (a small percentage that increases a little more each year until a maximum of 25% is reached)
Do you not think that raising the taxable maximum (eg $160,200) is a possibility?
They have already done this, and it is a bad idea unless they increase the maximum benefit amounts.
FRA needs to increase gradually every year until it reaches 70. Then allow us to delay starting until 75 with the same 8% increase.
Also, allow those who want to retire at 60 with a 100% reduction from age 70.
Taxing SS both when we paid into the system and again when we get those benefits is double taxation and is also very unfair
To me it's a no-brainer to increase the SS payroll tax rate a few basis points phased in over several years. And also significantly increase the contribution cap, then continue with annual increases of the cap.
It sounds like you enjoy paying taxes.
@@dougb8207 - If it means keeping social security solvent for millions, including myself, then yes, I don't mind paying my fair share.
The COLA couldn't be a year-to-year thing based on where you live. That would essentially trap folks in low-cost areas after a few years. Instead, just keep a national register of COLA "zones" and if you move, you get the new COLA amount.
Geoff: Great job as always. I think your correct about the option (#7 on your list). ALSO: I have heard great things about the Australian system . Have you done a RUclips on that system? Maybe we need a couple of options mixed together for a solution - we need younger folks to believe the Social Security System will be viable for them.
Be careful what you are asking for. Part of the Australian system is means testing. There is an income, and wealth, threshold that at a point you get nothing.
My opinion is that you increase the FRA permanently and, on a temporary basis (legislation would have a sunset clause) a combination of the other suggestions. The one, and constant, problem here is politicians who first wouldn’t do legalization with a “ sunset clause “ and secondly, if they did they’d change the legislation prior to expiration.
Since we are being forced to pay SS then it is morally repugnant to force a person the pay into a retirement system full well knowing they could not, essentially, never collect.
If one considers that SS was never intended to be the only source of retirement income then you have the second issue. Retirement funding is like a three legged stool. One leg would be SS, the second a pension/401k/ IRA and third selling your primary residence and moving to a less expensive location and pocketing part of your gain plus have reduced expenses. There needs to be incentives to personally save more and also the elimination of incentives for the populace to rely on the government- being self sufficient. Simple modest saving, compounded over time could provide a reasonable retirement income, when combined with SS and relocation, for retirees.
@@Dottydawes Thanks. I did not do my homework on Australia - but I know we need our "leaders" to work out a fix. Yes folks should be more self sustaining -
@@Dottydawes It also has a required "superannuation" program where employers have to contribute to a defined contribution retirement account.
Per the OECD: Australia’s Age Pension cannot be compared directly to benefits for the aged provided by other OECD
countries, which are primarily aimed at income replacement. Australia’s Age Pension is a flat rate payment
and redistributive in nature. It aims to provide Australian seniors with an income adequate enough to ensure
a basic living standard. In addition to cash payments provided by the Age Pension, Australian seniors can be
eligible for a comprehensive system of concessions and assistance for health, rent, pharmaceuticals and other
living expenses. The Australian government provides taxation concessions to support private retirement
incomes through its superannuation arrangements.
I didn't hear a discussion about raising the payroll tax limit or eliminating it entirely.
You forgot one that was the most obvious and that is the income limit on paying Social Security tax so right now as it is all those make over a certain amount I believe it’s 165,000 don’t have Social Security tax on any money above that amount so that means the higher incomes pay the standard 6% up to that threshold and after that threshold no more 6%
That is the easiest and most obvious way to at least start correcting the problem
I like the idea, but believe it or not that won’t move the needle. People on this channel think about finances but over half of retirees do not. The mega millionaires and billionaires (those that could move the needle) get their money from capital gains which are not subject to FICA.
There are plenty of W-2 regular income earners that make well over $400,000 a year such as all the doctors and administrators at the hospital where I work at and I’m sure that would make a dent maybe not a big dent but if you made a bunch of dents by other ways it would have an impact
@@missouri6014 SS pays out over $100 Billion a month Getting another $40,000 from people making $500,000 would not even make a ripple
Not true just Google it and you’ll find out
@@missouri6014 What’s not true ?
Increase of tax rate, and reducing dependent benefits for survivors might work the best for now.
Those are sensible.
Good ideas. My thought is to allow employees to privately invest 2% of their FICA in an approved Social Security mutual fund, building that to 4% over a period of years. Then, slowly phase out the Social Security Administration over the lifetime of the existing recipients. The employer tax would remain the same and pay the debt off over a 50 to 90 year period. Most employees would have a private retirement fund by the time the SSA disappears that would exceed the current program. This is not an unusual system. There was a tax on telephones through 2000 to pay for the expenses of the Spanish American war in 1897.
except the days of employees starting and retiring with the same company are long over. I think the average loyalty is two years. what a mess that would be!
@@e-spy ...Not to mention how much more Wall Streeet could hold the Got't hostage. Courtesy of that "Citizens United" garbage, we already have enough of that!
Even mutual funds can lose money; that's not insurance as intended.
So, let me clarify a couple of ideas. First, I use the word "privately." In my idea, the government only approves of a series of investment vehicles representing a range of risk. The employee would show proof of the investment or pay the 2% plus a penalty. Second, because this is a private fund, the employee would have complete portability and take it to wherever they work from McDonalds to a board room someday. Finally, all funds have risk, but the trend of the market over time is positive to the point that many insurance companies are writing mutual based insurance plans.
I think this solution is more fair. I also think that another possibility would be reducing benefits by 3% per annum until the program is phased out while implementing the new program
#7 for sure, Privatize Investing and cut spousal match. I think the Privatization option although a good one is really tough for an entity with the amount of investment funds of the US SS system.
Life expectancy is going down in this country, meaning the retirement years are shrinking. If anything, the full retirement age has to come down as a result. Isn't removing the earnings cap (I think it's 160K or something like that) the most obvious? It's a higher tax, obviously, for the top 10 percent of the population, but is it fair that the bottom 90 percent pays the tax all year, while the wealthy pay only part of the year?
Working class people's lifespan has always been lower than upper class people. It is getting lower. They die earlier so the low income people are subsidizing the better off. This is why I am against raising the retirement age. Someone who has done a life time of real labor, body is much more broke down in the early sixties than an office worker or other white collar worker. It is a fairness issue for me.
The 10 percent that pay Social Security tax on the full $160k have contributed more dollars than everyone that did not pay Social Security tax on the full $160k.
Correct. "Sweeten the pot" by regressively increasing the payouts as well. Eliminate the SS payout cap. I ommented on this above, but I haven't "checked my math" to see if it pans out.
@@twill143 but a far lower percent. total dollars is irrelevant. They HAVE far more dollars
@@twill143 Absolutely!
1&7 would be easy to implement and has impact. Family benefits never made sense to me and not fair to the population (I am married with a child). This is money for people who paid into it, not for their spouses or to fund offspring in retirement.
We increased retirement age from 65 to 67 but not early retirement. How about bringing it from 62 to 63?
Why stop there? 64 but treat it like the year that you turn 67.
Making the COLA subject to where you live punishes those who may have contributed the max for 35 years but may have decided to live in a low-cost-of-living location.
How fair is that?