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Counting your employer match I would say that it is yours. My ASSUMPTION is that if it was invested in say an IRA over the years it could produce a monthly benefit close to what you are getting.
However the formulas are designed to give low income workers a higher benefit (based on what you paid in) than higher income earners.
I’ve heard that not of all your Social Security is yours. Is that true?
How much of it is accumulated from the money you paid into vs, how much of it is through someone else paying for it?
Is it like 60% your money and the rest is someone else paying into it?
I honestly want to know.
Also, if you’re on SSDI through your dad’s Social Security, how much of that money you’re getting from SSDI is from your dad’s earnings?
Thank you.
The FICA taxes you have withheld from your paycheck in part fund the SSA, which manages the account like any other investment manager. When you receive your social security, all the money is yours that remains after taxes, just like any other form of income in this country.
It's relatively the same as the old passbook savings model that we used to have before the banking industry started forcing us into stocks and bonds, except that the money deposited is pre-tax rather than post tax, so when we draw it out, it's taxable.
When banks still offered a useable passbook savings, they paid you interest for depositing the funds so it could be used in loans to others, who paid interest for the use. The banks earned revenues off the difference between the interest they earned from borrowers, after they paid the savers interest for the use of their money.
That was before banks started making money off of making bad loans and then selling them to the junk market, and everything went down hill for working people.
I’ve heard that not of all your Social Security is yours. Is that true?
How much of it is accumulated from the money you paid into vs, how much of it is through someone else paying for it?
Is it like 60% your money and the rest is someone else paying into it?
I honestly want to know.
Also, if you’re on SSDI through your dad’s Social Security, how much of that money you’re getting from SSDI is from your dad’s earnings?
Thank you.
What is commonly called Social Security is actually Old Age, Survivors and Disability Insurance (OASDI). You are paying an insurance premium each month, and if you hit certain scenarios, the insurance pays out. What it pays out is based on a formula that takes into account what you paid in. But fundamentally, it’s insurance. Some people get more than they pay in. Others get less, even nothing.
There’s no real answer to the questions you are asking. The money someone pays in goes towards paying out to current recipients or into a trust fund. It isn’t set aside for you. Just like what you pay for car insurance isn’t.
You pay in half and your employer pays in half. But essentially you are paying in all of it since your employer would otherwise have added that to your salary.
Similar things happen when people get pensions. The employer “sets aside” the pension investment while you are working. The 401K program changed that, allowing you to invest that money for your retirement instead of your employer because yeah you’re smarter about how you invest it.
The best thing about Social security is that you are forced to put the money aside. Otherwise we would ignore saving for future needs when we are elderly.
What is commonly called Social Security is actually Old Age, Survivors and Disability Insurance (OASDI). You are paying an insurance premium each month, and if you hit certain scenarios, the insurance pays out. What it pays out is based on a formula that takes into account what you paid in. But fundamentally, it’s insurance. Some people get more than they pay in. Others get less, even nothing.
Yup, that's the correct way to think about SS.
There's a difference between SS and an insurance policy purchased from a company, however. When we buy private insurance we are entering into a contract with the insurance company. If the conditions that trigger a payment occur, the company must pay the benefit. In the case of SS we have no legal claim to the benefit. We're all at the mercy of Congress when it comes to receiving payments.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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It depends on many things, how long you paid into it, how much you made over those years, what age you started to collect, and how long you live after starting to collect. I'm sure that there are people who end up with more than they paid in, but also others that died soon after going onto SS and got very little of it. They are the ones that help pay for the rest of us.
The FICA taxes you have withheld from your paycheck in part fund the SSA, which manages the account like any other investment manager. When you receive your social security, all the money is yours that remains after taxes, just like any other form of income in this country.
It's relatively the same as the old passbook savings model that we used to have before the banking industry started forcing us into stocks and bonds, except that the money deposited is pre-tax rather than post tax, so when we draw it out, it's taxable.
When banks still offered a useable passbook savings, they paid you interest for depositing the funds so it could be used in loans to others, who paid interest for the use. The banks earned revenues off the difference between the interest they earned from borrowers, after they paid the savers interest for the use of their money.
That was before banks started making money off of making bad loans and then selling them to the junk market, and everything went down hill for working people.
There are so many incorrect statements presented as facts here.
1. The SSA is not an investment manager in any traditional sense. All the contributions to the Social Security trust fund not needed for current benefit payments and administrative expenses are invested solely in US Treasury securities.
2. Banks still offer savings accounts, currently paying 2-2.5% rate for demand deposits. No one is forced to invest in stocks. About 45% of Americans don't own stocks.
2. Social Security deductions are after tax. You pay Federal Income Tax on the amount you earn before SS contributions are deducted.
3. Social Security benefits are not taxable to all recipients. Furthermore, only a percentage of your Social Security benefits are subject to Federal Income Tax when received. The taxable amount is an approximation of the portions of your benefit provided by the employers' contributions and the earnings on the total contributions.
There's a difference between SS and an insurance policy purchased from a company, however. When we buy private insurance we are entering into a contract with the insurance company. If the conditions that trigger a payment occur, the company must pay the benefit. In the case of SS we have no legal claim to the benefit. We're all at the mercy of Congress when it comes to receiving payments.
Not true about having no claims to the benefit. Future enrollees may see slightly different rules but the rules that exist for you are steady. The largest effectors as you receive your payouts are related to how different states tax social security benefits. Some don’t tax them at all, some tax half, and some tax it all.
Congress can change the program at any time. If benefits are reduced, the only recourse is to vote in different members of Congress. There's no way to pursue one's projected benefit through the legal system. That was my point.
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