"Social Insecurity"
by Tom Purcell
"A quarter of a million dollars. That’s the amount that I’ve paid in FICA payroll taxes during my working career, according to my recent Social Security statement. FICA, which stands for “Federal Insurance Contributions Act,” “is a payroll tax that helps fund both Social Security and Medicare programs, which provide benefits for retirees, the disabled and children,” says the Social Security Administration (SSA). The FICA tax also will partially fund - at least I hope it will - my retirement years.
My statement says I am eligible to begin receiving Social Security payments of $1,851 a month when I hit age 62. If I wait until I am 70, I’ll receive $3,370 a month. However, if I had invested the $250,000 FICA deducted from my earnings on my own, I’d have, according to my money manager, more than $1.5 million socked away. If I drew a conservative 4 percent of that $1.5 million every year, I’d be collecting a $5,000 retirement check every month right away.
Of course, that is assuming I would have saved and invested all the money that FICA took from my weekly paychecks. More likely, me knowing me, I would have blown most of it on nicer cars and more vacations. Saving money for your future is hard, even for more-disciplined people.
My parents raised six kids on one income and had a lot of big bills along the way, so saving money for the future was not always possible. They now rely on the Social Security payments they receive every month to help them cover their basic expenses. Millions of elderly Americans are in the same precarious financial boat. The Social Security Administration reports that about 40 percent of Americans 65 and older receive half of their retirement income from Social Security - and about 13 percent rely on it for 90 percent or more of their income.
It takes some of the sting out of the 15.3 percent FICA tax that is imposed on my self-employed earnings to know that my contributions are helping others get by in their old age. But will Social Security be around to help me in my old age?
Social Security is now paying out more than it is taking in and the funds working taxpayers contribute now go directly to Social Security recipients. But what about the Social Security “trust fund,” which saved trillions of the surplus tax contributions that had rolled in for years? The partially good news is that it will not run out of money until 2034 - at which time Social Security payments will have to be reduced, taxes will have to be raised or more money will have to be borrowed. The bad news is that its funds were “invested” in government bonds, which the federal government happily spent on day-to-day budget expenses, such as foreign wars, food stamps and the national debt.
As the great columnist Charles Krauthammer explained in 2011, the Social Security trust fund is filled not with money but with special-issue government IOUs that can only be repaid by raising taxes or borrowing even more money. In any event, it’s anybody’s guess how much my monthly Social Security checks will be, so let me make the guys at the Social Security Administration an offer. How about you give me back my 250 large in return for removing me from your rolls? What do you say, SSA?
Hello?"
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