Lawmakers are considering legislation that would delay eligibility for full Social Security benefits until age 70 for millions of young Americans.
Today the full Social Security benefit retirement age is 66 for people born between 1943 and 1954. It gradually increases by 2 months per birth year until reaching age 67 for those born in 1960 or after.
I’m only 33, so if the retirement age is delayed to age 70 I will certainly be affected. But you know what? I think I’m ok with it.
Let’s face reality. The Social Security program is in serious trouble. According to the Trustees Report, the Social Security trust fund is scheduled to run out by 2037, at which point there will only be enough taxable income to pay about 75% of scheduled benefits.
It’s obvious that something needs to be done, and since life expectancy is much higher today than it was back in FDR’s day it makes sense that the retirement age is adjusted accordingly.
But I don’t think that’s enough. I’d also like to see an increase in the taxable maximum.
Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $106,800 (in 2010), while the self-employed pay 12.4 percent. So if you make less than the taxable maximum your entire salary is taxed. But if you make more than that, anything over the maximum is not taxed.
I’ve never really understood why the burden of paying for Social Security was almost entirely on the shoulders of the working class. Why should a middle class worker making $106,800 pay the same amount ($6,621.60) in Social Security taxes as LeBron James?
You don’t think the wealthy are using smart Social Security strategies to ensure they receive the benefits they’re entitled to? Of course they are…they didn’t get wealthy by making poor financial decisions and leaving money on the table.
I say up the taxable maximum. It will increase the amount of taxable income without devastating the middle class and working poor. And it will help insure that Social Security benefits are still around for the people who need them most.
What are your thoughts? Are you willing to push your retirement back a few years or pay more in taxes if you earn over the taxable maximum?