From the Ssa.gov website:
Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 63 million Americans will increase 1.5 percent in 2014, the Social Security Administration announced today.
The 1.5 percent cost-of-living adjustment (COLA) will begin with benefits that more than 57 million Social Security beneficiaries receive in January 2014. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2013.
Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $117,000 from $113,700. Of the estimated 165 million workers who will pay Social Security taxes in 2014, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Explain to me again why that cap is on $117,000. I guess I just don’t get it why lower salaried people can afford to pay over 6.5% of their salary and those making in excess of $117,000 can’t. What makes their money sacrosanct?
If there is a social security issue, and there is, it seems like that is a mighty low cap. What would happen if the FICA tax was on all earned income up to $200,000? $500,000? What is preventing that? I expect corporate lobbyists are a big part of that equation since corporations would be stuck with an equal amount.
There is a cap – the Social Security Wage Base – on contributions because there is a maximum monthly cap on benefits. The wage cap was just raised and the maximum payment is currently $2431 for a 65 year old retiring today. Originally it was proposed that high earners be totally exempt from the tax but Congress changed it so that there was a cap. If the cap was lifted it would be a 6.2% tax raise on HCE (Highly Compensated Employees) and would get more dollars into SS but politically the SS maximum benefit would also need to be raised. How would the system work when someone like (insert CEO name) is pulling a million or two in a monthly benefit?
The idea of removing the cap has often been proposed as a way to help bail out Social Security but is always portrayed as a “tax hike on everybody”, which it isn’t. Only an increase on those making over the present cap or HCEs. I would humbly suggest that some would pay into SS but never receive a benefit if their income is above X amount. Or perhaps the benefit could be based on your retirement income. If you make A then you get B amount of Benefit. If you make A – n then you get B + n. Conversely, if you make A + n you get B – n.
There is already a cap on what you can make. People that retired 10 years ago aren’t going to be adjusted to the new ss cap either. They will just get the COLA each year.
If I were a wealthy retiree, I would resent having to pay on $250k and then not get SS. I think they just get the capped amount.
I think some adjustments could be made with allowing people to sponge off a spouse. I know people whose own SS isn’t going to be that much because of length of time in the work force or low pay who draw half their spouse’s amount instead. There are also people who have had multiple spouses who get to choose the one with the highest income to link too. It makes my head hurt to think about it.
One the other hand, when 2 ss checks are coming in, that’s great. What happens when the spouse dies? You get to keep the biggest check but its still only one check. You are stuck.
George, I disagree.
If you and I pay the same into the system, we should get the same out of it (depending on life span). If I am a big spender all my working life or did not contribute to a 401k or pension – should you be penalized because you did? No, you should not. SS is already means tested somewhat with those with an income paying taxes on the SS.
I agree. SS is definitely means tested in a very sneaky way.
Of course my idea would be a fairly true form of socialism. Just an idea-please don’t shoot the messenger. But still think we should remove the cap on how much income is taxed.
People do sponge off a spouse. My ex-wife drew SS based on my income for several years before she retired and her own SS then became more than she could get from mine.
Exactly, George. I have never figured out how it works. I should have sponged off of Mr. Howler. How does it work, can you explain?
Take a look here Moon: http://www.socialsecurity.gov/retire2/yourspouse.htm#a0=1
Do you understand all that? It just makes my head hurt to think about it.