How To Get More From Social Security

How To Get More From Social Security – Social Security is the largest program in the federal budget and accounts for nearly a quarter of total federal spending. It provides benefits to nearly 9 out of 10 individuals over the age of 65, or 15 percent of the American population. Without Social Security, two-thirds of seniors would be considered poor, according to the study.

However, the program faces a funding shortfall and is currently projected to run out of reserves in just over a decade. At that point, unless Congress acts, it will not be able to pay full benefits to its beneficiaries. One potential solution to improving the program’s financial outlook is to increase or eliminate the upper limit on earnings subject to Social Security payroll taxes.

How To Get More From Social Security

Federal Insurance Contributions Act (FICA) taxes are the primary source of revenue for Social Security and are the largest component of taxes, commonly called payroll taxes. Employers and employees each pay 7.65 percent of wages as FICA taxes; the social security portion is 6.2 percent and is charged only up to a maximum amount or income limit that is determined annually. (The other 1.45 percent is earmarked for the Medicare hospital insurance program and is not subject to income limits.) The self-employed also contribute to these funds through Self-Employment Contributions Act (SECA) taxes. The rates for SECA taxes are identical to those for FICA taxes, with the only difference being that the individual is responsible for paying both the employee and employer portions of the tax.

Social Security Is Getting Less Progressive

The limit on annual earnings subject to Social Security taxes is called the taxable maximum or Social Security tax ceiling. For 2023, that maximum is set at $160,200, an increase of $13,200 from last year. When the Social Security tax was first introduced, it was limited by law to the first $3,000 of earnings (which would be equivalent to about $56,000 in 2021 dollars). Since 1975, the taxable maximum has generally increased each year based on an index of average national wages. About 6 percent of the working population earns more than the taxable maximum.

Individual income taxes in the US are generally progressive, with higher-income taxpayers paying a greater share of their income in taxes. However, low- and moderate-income individuals pay a larger share of their income in payroll taxes than higher-income taxpayers. In part, this situation stems from the existence of a tax cap on Social Security. For example, someone with a salary income of $67,000 a year would owe $4,154 for their share of Social Security taxes. However, someone with triple that income – or $201,000 – would owe $8,854, which is just over twice the amount of tax.

There have been a number of proposals to increase, eliminate, or otherwise adjust the payroll tax cap as a way to shore up Social Security’s finances.

An example of one such proposal, the Social Security Act of 2100, would apply the Social Security payroll tax to income above $400,000 in addition to income below the current maximum taxable amount. The difference between the two will narrow over time as the maximum taxable amount increases and the $400,000 threshold remains unchanged. This gap has earned the nickname the “doughnut hole” and would serve to gradually increase the program’s revenue over time while not subjecting people who fall into the gap to an immediate tax increase. Although projections vary based on assumed wage trends and the specific details of each proposal, economists predict it will take roughly 20 to 30 years for the donut hole to disappear. Such an approach aims to make the tax more progressive by increasing the tax burden on higher-income Americans.

Do Not Work More Time: How To Maximize Your Social Security Benefits

Another approach suggested by economists is to set the tax ceiling as a fraction of total revenue rather than a dollar figure. The share of total earnings that is subject to the Social Security tax has declined over time as the earnings of the highest paid individuals have increased faster than those of other workers. In 1982, 90 percent of earnings were subject to Social Security tax, but by 2017, that share had dropped to 84 percent. Setting a target for the portion of total earnings that is subject to the Social Security tax — say, 90 percent — would increase revenue and help improve the program’s solvency while making the tax more progressive.

Finally, a consideration in raising or removing the cap on taxable income is whether wages above the current cap will also count in the formula that determines benefits. Under the current system, increasing the cap would also increase benefit payments (the 2023 maximum monthly benefit for people of full retirement age is $3,627), leading to higher costs for the program (although these would be more than offset from higher tax revenues).

Proponents of increasing or removing the earnings limit argue that it would make the tax less regressive and would be part of a solution to bolstering Social Security trust funds. For example, the Congressional Budget Office estimates that subjecting earnings above $250,000 to payroll tax in addition to those below the current taxable maximum would raise more than $1 trillion in revenue over a 10-year period. Another argument is that eliminating the taxable maximum would correct rising income inequality and the fact that people with higher incomes tend to live longer and therefore receive larger Social Security checks over a longer period of time .

Opponents argue that raising or eliminating the taxable maximum could weaken the link between the amount people pay in Social Security taxes and the amount they receive in retirement benefits if benefits are not adjusted upward to reflect tax contributions. Opponents also argue that while low-income people may pay a larger share of their income in Social Security payroll taxes than those who are wealthier, they also receive a disproportionate share of government transfer payments that are not subject to tax. These opponents cite programs that were created to offset, at least in part, the regressive nature of the Social Security payroll tax. Finally, high-income beneficiaries may also be subject to income tax on the Social Security benefits they receive.

Us Cities Where Social Security Benefits Afford A Comfortable Lifestyle: Report

Finally, some economists predict that if the cap were lifted, employers and employees could respond by shifting taxable compensation to a form of compensation that is taxed at a lower rate. For example, employers could reduce wages but increase pension benefits that are deductible from corporate income tax in an attempt to offset the additional payroll taxes they would owe.

Raising or eliminating the Social Security tax cap is just one of many solutions to improve Social Security’s financial outlook — but it’s clear that some action must be taken to ensure the future of this vital program. More options are described here.

Bipartisan Policymaking in Divided Government We asked opinionated experts from across the political spectrum to share their perspectives.

National Debt Clock See the latest figures and learn more about the reasons for our high and growing debt. The Social Security Expansion Act would give recipients an extra $200 a month in benefits. The bill was introduced in the House and Senate but failed to pass.

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In recent months, many VERIFY readers have reached out to the team with questions about potential changes to Social Security benefits in 2023.

Social Security provides people with income when they retire or are unable to work because of a disability. Those who are retired can usually start receiving their Social Security benefits as early as age 62.

VERIFY has already verified one claim and confirmed that Social Security’s annual cost-of-living adjustment (COLA) is expected to be higher than average in 2023 due to inflation.

But could there be another increase in benefits? Edward approached the team to ask if a bill would give Social Security recipients an extra $2,400 a year.

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Yes, one bill would give Social Security recipients an extra $2,400 a year in benefits. The bill has been introduced in both the House and Senate, but an expert told VERIFY that it is unlikely to pass in 2022.

Congressman Peter DeFazio (D-Ore.) and Senator Bernie Sanders (I-Vt.) introduced the Social Security Expansion Act in both the House and Senate on June 9, 2022. The bill was referred to various House committees and the Senate for discussion, but Congress has yet to take further action.

Mary Johnson, a Social Security and Medicare policy analyst for the League of Senior Citizens, told VERIFY that this type of legislation “will be difficult to pass before the end of the year and in a Congress as divided as this one.”

When the 117th Congress officially ends on January 3, 2023, members of the next Congress will have to reintroduce any legislation that has not yet passed.

How Social Security Claimants Can Get More Than $4,000 A Month In Benefits From 2022

One of the provisions included in the Social Security Expansion Act is a $200 monthly increase in Social Security benefits for new and existing recipients, separate from the annual cost-of-living adjustment (COLA), according to

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