Obama's raising $102,000 Social Security Threshold

[MonkeyMama]

Okay, where to start.

1 - This is not on Obama's agenda. He proposed this during his campaign - clearly not a priority right now. I don't see mention of this anywhere on the web so I guess this is where the rumors will begin. (I do see mention in mid-2008 during his campaign).

2 - In his campaign he mentioned taxing incomes OVER $250k, around 4%. (Not the current 6.5%). & to note, this tax is at the individual level. So a couple could make $500k and not be affected.

3 - Not sure how this really affects small businesses. Maybe the owners, but really, I don't know a lot of small business owners who pay more FICA than they have to, to max out their retirement benefits (around $230k income). I work with small business clients in a HCOLA. Most of them take about $230k wages annually, max out their retirement, and keep the rest of the profits in the business (or take as dividends). & yeah - none of their employees are paid anywhere near $250k. So I don't see this affecting my clients a bit.

4 - Social security and every other government insurance program is based on the principle that low/mid wage workers and the only ones who benefit from the program, and thus are the only ones that pay in. This is why the cutoff is currently about $107k for social security. I don't think Obama is going to snap his fingers down the road and implement this. This is a major rethhinking of how we administer government run insurance programs. My personal feeling is that this is not even in the cards. So overall I Wouldn't waste a lot of energy and thought on it. Though I guess I could be wrong.

[tripods68]

Okay, where to start.

1 - This is not on Obama's agenda. He proposed this during his campaign - clearly not a priority right now. I don't see mention of this anywhere on the web so I guess this is where the rumors will begin. (I do see mention in mid-2008 during his campaign).

2 - In his campaign he mentioned taxing incomes OVER $250k, around 4%. (Not the current 6.5%). & to note, this tax is at the individual level. So a couple could make $500k and not be affected.

3 - Not sure how this really affects small businesses. Maybe the owners, but really, I don't know a lot of small business owners who pay more FICA than they have to, to max out their retirement benefits (around $230k income). I work with small business clients in a HCOLA. Most of them take about $230k wages annually, max out their retirement, and keep the rest of the profits in the business (or take as dividends). & yeah - none of their employees are paid anywhere near $250k. So I don't see this affecting my clients a bit.

4 - Social security and every other government insurance program is based on the principle that low/mid wage workers and the only ones who benefit from the program, and thus are the only ones that pay in. This is why the cutoff is currently about $107k for social security. I don't think Obama is going to snap his fingers down the road and implement this. This is a major rethhinking of how we administer government run insurance programs. My personal feeling is that this is not even in the cards. So overall I Wouldn't waste a lot of energy and thought on it. Though I guess I could be wrong.

2/3 of the this economy are run by small business owners. This was part of his "soak the RICH campaign" his done so effectively last year.

So far Obama been successful in keeping many of his promises. This one is no different. His current budget proposal that many Democrats "love" by raising taxes on the "rich" making more than $250K eventually will pass in both houses. It just a matter of time IMO.


Actuaries say raise retirement age for benefits - Cracked Nest Egg- msnbc.com

Obama's Social Security Fine Print - WSJ.com

[EEinNJ]

Raising the threshold is a smart move. It should be indexed for inflation at the very least. As a flat rate tax, it is not "soak the rich" Flat taxes hit lower income people harder. Given the demographics of the US, a shortfall is coming and the government knows this.
As for being able to invest it for yourself, you have to consider risk and the consequences. Social security is (theoretically) a 100% safe defined benefit. There are no guarantees in the stock market- just ask anyone at or near retirement age right now who is counting on their investments that are worth half what they were.

[jIM_Ohio]

Lower the SS tax from 6.2% (per individual) to 6.1%.

The raise the benefits age by 3 years.

In 3 years do that again.

Repeat every 3 years and the system will become solvent quickly (because people would not be able to receive benefits until age 74 after round 3).

Every .1% drop allows any employer with 1000 people on payroll to increase profit by 1 person's salary, or hire 1 more person.

Ex 1000 people making $50,000 is paying 1000*$50,000*6.2%=$3.1 Million in SS tax for those 1000 people.

Lower that tax .1%

same bill is now$3.05 Million. Just saved company $50,000 to their bottom line or allowed them to hire 1 more person.

If a small company had 10 employees, earning 50k, they would see a similar savings over a long period of time.

[KTP]

Even better plan:

Allow people who have contributed to SS for more than 15 years the option to "opt out". IE, no longer will the 12.4% go to SS, it will go into your 401k, but you release all claims on future benefits from SS.

My wife has been contributing for 20+ years and yet this would be a better deal for her than *maybe* receiving SS in another 25 years.

What kind of plan is a retirement fund where people be willing to give up 20 years of contribution just to get out of it? It is like a timeshare from hell!

[jIM_Ohio]

Even better plan:

Allow people who have contributed to SS for more than 15 years the option to "opt out". IE, no longer will the 12.4% go to SS, it will go into your 401k, but you release all claims on future benefits from SS.

My wife has been contributing for 20+ years and yet this would be a better deal for her than *maybe* receiving SS in another 25 years.

What kind of plan is a retirement fund where people be willing to give up 20 years of contribution just to get out of it? It is like a timeshare from hell!

SS is more than a retirement plan- it provides disability and survivor benefits. The plan should not be optional, IMO. It should be solvent, though, 100% of the time.

[tripods68]

Bush already tried to put forth a proposal to fix social security which will take small portion EE & ER contributions into defined contribution - 401K styled plan. It didn't get enough support.

[disneysteve]

Raising the threshold is a smart move. It should be indexed for inflation at the very least.

I'd be in favor of indexing the threshold for inflation as long as you also index my income for inflation. Since that ain't gonna happen, what you're doing is gradually raising taxes, which is exactly what has been happening for years. The threshold goes up every year no matter what happens to incomes.

[jIM_Ohio]

If you look the SS tax has not always been 6.2/12.4%. Within last 10-20 years the payroll tax was raised to this level (initially around 2%, increased to around 4%, then increased to 6.2%). All these raises were done (in effect quadupling the tax) while only raising the minimum age from 62 to 67 over a period of around 20-30 years (meaning the 5 year age increase is phased in over around 3 decades).

Politicians avoid this- they have little incentive to fix a future problem when they won't even collect from the program later (or pay into it now).

[LivingAlmostLarge]

It pays for disability and death. Children of parents who died young get benefits as well.