Obama's raising $102,000 Social Security Threshold

[tripods68]

"Obama has called for a Social Security payroll tax on incomes above $250,000 a year, compared with the current $102,000 threshold"


Who benefit if this threshold is changed?

[kork13]

the failing social security program for one.... currently, anyone who makes more than that $100k-ish level (say, someone who makes $300k/yr) pays into social security as if they did make that $100k. Just from a numbers perspective, it would be an effective way to bouy up social security... SS would get 12% (and change) of $300k from the employee and employer rather than the current 12-ish% of $100k from the same employee/employer.

[Like2Plan]

"Obama has called for a Social Security payroll tax on incomes above $250,000 a year, compared with the current $102,000 threshold"


Who benefit if this threshold is changed?

I believe it has been raised to $106,800 in 2009.

I can tell you who it won't benefit... that would be the folks who make between 106,800-250K--especially self employed who get the double whammy treatement (6.2% X 2).
SS benefits are not linear to the amount contributed. Folks in the upper brackets get a smaller percentage in benefits relative to the contributions they've made. The maximum benefit in 2009 is $2,323/mo .

[cptacek]

Oh good, they can put this money into the Social security lockbox for later.

/sarcasm

In all seriousness, I don't know if I am for or against this. My first instinct is, not only will this up the taxes on recipients of those high salaries, but also the employers who pay these high salaries will also have to pony up. Self employed people who make that much will have to pay double what the salaried person does (they have to pay both parts).

But, on the other hand, the upper limit has always seemed kind of arbitrary to me, so I don't know if upping the limit will have much of an effect.

[disneysteve]

The SS limit rises EVERY year. Obama is just proposing a much bigger jump in the limit. When I first started working, I would hit the income limit in late September or early October. Then it was late October, then November, now I'm into December. I guess by next year, I'll be taxed on 100% of my income. The rate at which the limit has increased has been far faster than the rate at which incomes have increased so this has been a silent tax increase that nobody ever talks about.

As cptacek mentioned, it is also a burden on employers since they pay half of the tax. It will be rough, especially on small businesses, who are already struggling with the lousy economy.

[jIM_Ohio]

Bad move- taxing the rich and giving to poor.

Self employed people will be paying double the increase
The people paying the most will pay more in taxes than they will receive in benefits

this increases likelihood a self employed person will either retire early or hire fewer people.

[tripods68]

This would definitely would affect us as extra taxes.

I would rather see social security raise age limit from 65 to 67 to receive full benefits. That would at least extend social security solvency above 2041. I'm for it because American are living longer.

[LivingAlmostLarge]

I'm also for raising full benefits to age 70. Anyone above $100k gets a free break though.

[KTP]

You know what really excites me? My wife has been contributing to SS at near the max for the last 20+ years. If you figure that todays dollars contribution of $12,500 to SS matches the past years, counting for inflation, that is a significant chunk of change she has put toward the government retirement plan. Imagine what she is going to get, having had $200,000+ contributions compounding for 40+ years! She should get well over 1 million from this if the government invested her money wisely. I am confident they have.

[tripods68]

You know what really excites me? My wife has been contributing to SS at near the max for the last 20+ years. If you figure that todays dollars contribution of $12,500 to SS matches the past years, counting for inflation, that is a significant chunk of change she has put toward the government retirement plan. Imagine what she is going to get, having had $200,000+ contributions compounding for 40+ years! She should get well over 1 million from this if the government invested her money wisely. I am confident they have.

I differ on the view that "you get only the basic payout" enough to make social security solvent. It provides the most basic of benefits to all Americans. The rest of "us" must rely on other means, if want to maintain current standard of living beyond social security benefits. It's flawed to assume because someone have contributed to the max in social security effectively provides them the highest payout. It is not that simple because of the limit imposed by the government those who makes considerable more than most average Americans.

[pearlieq]

Ugh. So glad to contribute more to something I'll never receive since it will either be insolvent or means-tested by the time I get it.

Coming on top of a proposed rogering on our state income taxes, this apparently isn't a great week to enjoy the fruits of your labor.

Every day I'm more convinced that fiscal conservatism is dead.

[LivingAlmostLarge]

Social Security is not meant to be fiscal conservative It's a wealth redistribution/social program. Meant to help those who are poor.

[GrimJack]

I believe it has been raised to $106,800 in 2009.

I can tell you who it won't benefit... that would be the folks who make between 106,800-250K--especially self employed who get the double whammy treatement (6.2% X 2).
SS benefits are not linear to the amount contributed. Folks in the upper brackets get a smaller percentage in benefits relative to the contributions they've made. The maximum benefit in 2009 is $2,323/mo .

Have you crunched any numbers? I am no finance expert but b.o.e. tells me that someone who retires at age 65 and lives to 85 will receive 20*12*2323 = $557,520 - does not seem so bad to me. I am sure there are other factors to include.

[pearlieq]

Social Security is not meant to be fiscal conservative It's a wealth redistribution/social program. Meant to help those who are poor.

That was not in question. Most people here have a grasp of that basic concept.

There are fiscally conservative ways to manage or modify it.

[Like2Plan]

Have you crunched any numbers? I am no finance expert but b.o.e. tells me that someone who retires at age 65 and lives to 85 will receive 20*12*2323 = $557,520 - does not seem so bad to me. I am sure there are other factors to include.

I think a lot of people have not crunched the numbers....

Assume 250,000 per year income for 35 years, self employed. The contribution is 12.4% of $250,000 = $31,000 X 35 years =1,085,000 in contributions alone.

Assume 150,000 per year income. 12.4% of 150,00 X 35= $651,000 in contributions alone.

Assume 106,800 per year income. 12.4% of 106,800 X 35= $463,512 in contributions alone.

Also consider that when you are drawing benefits, there is already a "means" test. If you have sacrificed, planned and saved for your retirement and your income meets a certain threshold, your social security benefits are taxed (again).