65 is the new 45 – just ask my mother! And while people are living longer, the Social Security system has not caught up to speed. In the mid-1940s, there were 42 workers paying in for each Social Security beneficiary. By 2020, this ratio will drop to 2.8 workers per beneficiary.
As if that wasn’t enough to make you think about the “security” in Social Security, the “baby boomer” generation joins Social Security at 10,000 a day and has since 2008. Many of the 76 million baby boomer Social Security recipients began withdrawing at 62, which increased the amount drawn from the System and subsequently reduced the amount of tax revenue being added to the System.
Another fun fact is that lifespans are increasing. We are living into our 90s now, compared to our 50s and 60s when the Social Security system was established. This means that beneficiaries are drawing payments for many more years than originally expected.
The new Tax Cuts and Jobs Act does slightly address the Social Security dilemma. In 2017, all earned income between $0.01 and $127,200 was subject to Social Security’s 12.4% payroll tax, with income above and beyond $127,200 not subject to the tax. This year, this earnings cap will be increasing by $1,500 to $128,700. That means higher earners could owe up to $93 or $186 in additional payroll taxes. The difference will depend on whether they’re employed by someone else, which would mean their employer covers half of the 12.4% payroll tax, or if they’re self-employed and responsible for all 12.4% of the tax. This means more revenue into the System which is than paid out to Social Security beneficiaries.
Things to think about – What does all this mean for your retirement? Is there “security” in your Social Security? What planning steps can you take in ensure your financial comfort during retirement?
Always remember that it is better to plan calmly than react in panic. AnnaMarie L. Mitchell, P.A. is here to help you every step of the way. Call us at 727-230-0333 and start planning today!