You would think the world is ending

[QuarterMillionMan]

Fortunate for me this doesn't affect my paycheck. I'm employed by an entity that doesn't pay into the social security administration. I'm not referring to an illegal business or "under the table," so to speak but rather a legal operation. However, I have earned over 40 credits of social security credits from previous employers but I'm not necessarily optimistic that in 20 years when I do retire the SSA will have enough funds for me to draw upon in that future time (approx the year 2032), at least I'm not counting on it.

[disneysteve]

I've always worked for large companies, so maybe I'm naive, but don't most people get 2-3% raises every year?

I've never worked for a large company and no, I've never gotten a 2 or 3% raise every year. I actually haven't had a raise for years.

[cypher1]

I've always worked for large companies, so maybe I'm naive, but don't most people get 2-3% raises every year?

I wouldn't say most people in large companies. Employers always find excuses with budgets, not hitting their quarter goals, etc. In the last 4 years at my previous employer, my average raise was about 1% for excellent performance reviews from management. During the recession I watched our IT staff shrink, and friends laid off and moving back home with parents, so I didn't complain about my "raise". I realize that's not all companies do that, and there are many other factors that can affect annual raises/payroll.

[cooliemae]

I agree with pretty much everything everyone has been pointing out.

The 2% break in SS contributions was temporary and while I don't want to see my taxes go up, I understand that it was temporary.

I also understand that there are a good number of people that spend their money very wisely, but just don't have enough to get everything done, so a 2% cut can be very dramatic if you're on the edge.

We seem to have a short term memory loss when it comes to temp. tax breaks. Congress and the President have spent over two years talking about the Bush tax cuts which were suppose to be temporary to begin with. Too bad everyone forgot about that when it was time for them to expire (again I don't want to see my taxes goes up, but I understand that things that are temporary are temporary).

Not everyone gets a COLA every year. My wife and I haven't seen one in two years and have lost about 5.6% of our purchasing power because of inflation. The 2% tax break was a nice offset to this, but now we're looking at our third year of having no COLA and this year, we won't see the 2% tax break.

[moneybags]

The biggest problem with the 2% change is that most taxpayers are not paying attention to what's going on with the tax changes. This was not a secret that the government was hiding. Even if you forgot about for a few months, it has been in the news over the last several months in all the fiscal cliff news items.

Now instead of people being glad they had an extra 2% for a while, everyone is now mad.

[Like2Plan]

I like a tax break as much as the next guy, but what I don't understand is how on one hand the social security system is going bankrupt and will not be able to pay the promised benefits but then on the other hand reduce the cash flow going into social security by the 2% through the temporary reduction on the payroll taxes? If you consider the normal individual SS contributions of 6.2% of income were reduced to 4.2%, that is about a 32% reduction for the individual contributions. That doesn't make sense to me.
One one hand, you could say this money is just another part of a person's retirement savings... On the other hand, some people may feel this is just throwing more good money after bad because they don't expect much from the SS system.
But, no matter from which angle a person looks at it-it is more money coming out of the paycheck...

[disneysteve]

I like a tax break as much as the next guy, but what I don't understand is how on one hand the social security system is going bankrupt and will not be able to pay the promised benefits but then on the other hand reduce the cash flow going into social security by the 2% through the temporary reduction on the payroll taxes?

One thing that many people don't realize, or at least I rarely hear mentioned, is that the SS tax has actually been increasing for years. Even thought the rate - 6.2% - has been steady, the amount of income subject to that tax goes up every year. For example, for 2012, SS tax was paid on the first $110,100 of income. In 2011, it was $106,800. Ten years ago, it was only about $85,000. Twenty years ago, it was about $60,000.

So without an official "tax increase" they have still increased the amount being paid in each year by raising the cap. I used to max out on my SS tax in September. Then it was October. Then November. Now I pay it the entire year.

[cooliemae]

I like a tax break as much as the next guy, but what I don't understand is how on one hand the social security system is going bankrupt and will not be able to pay the promised benefits but then on the other hand reduce the cash flow going into social security by the 2% through the temporary reduction on the payroll taxes? If you consider the normal individual SS contributions of 6.2% of income were reduced to 4.2%, that is about a 32% reduction for the individual contributions. That doesn't make sense to me.
One one hand, you could say this money is just another part of a person's retirement savings... On the other hand, some people may feel this is just throwing more good money after bad because they don't expect much from the SS system.
But, no matter from which angle a person looks at it-it is more money coming out of the paycheck...

The money that would have gone into SS without the 2% reduction was actually paid into the SS Trust Fund by the Gov't so the trust fund did not take a hit.

[humandraydel]

The money that would have gone into SS without the 2% reduction was actually paid into the SS Trust Fund by the Gov't so the trust fund did not take a hit.

Well, this is laughable. All that means is the government borrowed the money and at some later date the income taxes will have to rise to account for that.

[disneysteve]

Well, this is laughable. All that means is the government borrowed the money and at some later date the income taxes will have to rise to account for that.

Exactly. It was "paid into the SS Trust Fund" how exactly? Where did that money come from? Selling more T-bills? If we all ran our households like the Government runs theirs, we'd all be in deep trouble.

[wolfy]

I've always worked for large companies, so maybe I'm naive, but don't most people get 2-3% raises every year? So basically this year I lost most of my raise to the 2% tax increase. So I actually won't notice, it will just feel like I didn't get a raise.

I work for a large hospital system and we got a 2% raise in November of 2012. However, starting January 1st our healthcare premiums went up 5%. So that ate my 2% raise up and also an additional 3% of my pay. So add in the 2% tax expiration and now I've taken a total pay cut of 5%. 2% won't put us in the poor house, less money to spend yes, but 5% makes me have to tweak the budget.

My point is I can see why people would be freaking out. For them it may not be just a 2% decrease in pay it may be a lot more depending on other factors (such as benefits, etc...)

[disneysteve]

our healthcare premiums went up 5%.

Did the premiums go up 5% over last years' premiums or did they actually go up by 5% of your income? I'm guessing it is the former. So your pay didn't actually drop by 3% including the tax hike.

Let's say you pay $500/month for insurance. If insurance went up by 5%, it is now $525 but $25 isn't 5% of your income.

[snafu]

I see SS with holding as an enforced, personal savings account. The problem is the government controls how the money is 'invested' and how it's distributed. The real answer is to demand the government 'invest' the SS premiums from employer/employee contributions in a prudently managed manner. They seem to use that money to fund their favored programs and fiduciary responsibility doesn't exist. Is there linkage between how much an individual & their employer contributed and how much the individual collects in benefits?

We see benefits being delayed from age 65, to age 66...eventually benefits will commence at age 70. People need to realize they will be funding their retirement for 35 years! How do we convince them to look long term?

[marvholly]

My HVAC guy was here Sat to do a repair on my 10 week old furnace (covered by warantee). He was complaining about his pay being $50 less every 2 weeks.

I explained to him that the SMART thing to have done was to just increase his retirement contribution by that 2% ($50) and since he had NEVER had the money he would NOT be missing it now and would have been $1300 plus 30+ years growth (he is 35) to a more cpomfortable retirement. It is what I would have done if I was still working.

He also said his car payment ($400+/month) would be done this spring. He looked at me like I was nutso when I asked his plans for that $$. I suggested he set up a separate auto savings account. In 21/2 years he would have a comfortable downpayment on a new or total payment on a 3 y/o car.

[kv968]

Is there linkage between how much an individual & their employer contributed and how much the individual collects in benefits?

There is a quasi-linkage in how much an individual and employer contributes and how much one collects in that the distribution is calculated by the person's past income. It's not like they go back and look at exactly what you contributed but basically figure you paid the SSI tax on all those qualified earnings so they can derive a number just from those past earnings hence what you should have paid in.