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[quote=Escort Rider;14608203]If you have wages which fall under Social Security, the employer is required to withhold the payroll tax, regardless of the numbering system, is he not? Are you saying individuals can simply opt out of this?? I have never heard of such a thing. quote]
I used to work construction. Many of the workers would find these 12 hour 7 day a week jobs (or 6 ten hour days) and work the 6-7 months required to finish up the job. When I was new to the scene, I was surprised to find that many of the workers who were not married, were claiming 4-5-6 dependents on their W-9 (I think it is). I asked other workers how you can do that? They said, you can claim all you want, in order to reduce your payroll taxes, BUT, when it is time to file your tax return you have to claim the accurate number, be it 1 (themself) or 2 (they and their spouse). So, workers can keep more of their pay checks by over claiming their exemptions. These construction "bums" (that was the language), were trying to keep as much of their wages as they could from those few weeks or months of work, so they could not work the rest of the year. It was not uncommon for time gaps between jobs. Maybe the next job was many states away and a worker wanted to hang around the house and wait on something closer by.
I decided to claim 3 though I was single. Now the result was that when I filed my return I had to claim 1. The result of this was my normal tax refund was LESS because I had over claimed on my W-9 and the normal amount of payroll taxes had not been taken out, so I lost it in the form of a smaller refund.
I. Introduction
I agree that Social Security (hereinafter "SS") payroll taxes are paid without distinction for the type of benefit (retirement, disability, or survivors). However, there are some substantial differences between actuarially-based pensions (where the benefits are directly proportional to the amount paid in) and SS, and these differences shed light on the basic structure and nature of SS.
I have absolutely no idea why you are comparing SS to a retirement pension, since as you are no doubt aware, it was never designed to be a stand-alone pension program.
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Originally Posted by Escort Rider
II. Survivor Benefits
Let's take the case of a worker who is single and has no children, and who remains so until retirement. With most insurance, the premiums paid relate to the potential benefits payable in case of a loss or death covered by the policy. But under SS we all pay the same premium (payroll tax), which means the single worker is subsidizing those with children (who are potential beneficiaries). In similar fashion, the worker with one child is subsidizing the worker with two or more children. In a traditional (actuarial) pension, retirement benefits are reduced if the retiree chooses to provide continuing payments to a beneficiary after his or her death, but not in SS.
Again, why are you going through this exercise? You're comparing apples to oranges. Since we're talking about insurance, (as in Old Age, Survivors, and Disability Insurance), a better comparison would be with health insurance policies. As most policies distinguish between single and family coverage and not by number of children, you could make the same argument that a worker with one child is subsdizing the insurance of a worker with 2,3,4, or more children.
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Originally Posted by Escort Rider
IV. Calculation of Retirement Benefits
The calculation of retirement benefits favors low-wage earners over high-wage earners; the latter receive a much smaller percentage of their wages in benefits than the former. It works as follows (in 2010): The first $761 of average lifetime monthly earnings is multiplied by 90%, the next $4,568 by 32%, and the remainder (if any) by 15%. This is in stark and dramatic contrast to actuarial pensions. Now whether this is good or bad, proper or improper, I am not even addressing here; it is a philosophical issue each reader will decide for himself.
I am well aware of how this works. In fact, I used to give seminars on it. (BTW, just so other readers are clear, it is AIME - Average Indexed Monthly Earnings, so wages from earlier years are given an inflation multiplier.) But again, what is your point? SS is not set up as a tradional pension program. It works exactly as it was designed.
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Originally Posted by Escort Rider
V. Comparison of Traditional Pensions with SS
Rather, the explanation lies in the fact that SS is not only a retirement system, but is also an insurance system providing disability and survivors' payments which reduce the funds available for retirement payments. This is not automatically either good or bad, but it does explain why it is so damnably difficult to get by on SS alone in retirement.
Again, because SS was never designed to be a stand-alone retirement program. It is meant to supplement one's retirement income.
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Originally Posted by Escort Rider
VI. Word Choices
"Welfare" may have been a poor word choice on my part to describe the insurance aspects of SS, but they do have some "welfarish" aspects, if I may use that probably incorrect word. I'm not sure what word would be best, but once we understand the system as a whole, it becomes just semantic quibbling.
It is not semantic quibbling all. You keep wanting to compare SS to a pension program rather than an insurance program. Is health insurance "welfarish" because some people with serious health conditions receive $50,000 or more in health care benefits while relatively healthy individuals receive much less even though they may pay the same premium? Is it "welfarish" because a family of 5 may receive more benefits than a family of 2? Of course not. So why do you continue to try to paint SS with the welfare brush?
I was never arguing that SS was not working as designed. Rather, I was describing exactly how it is designed, and was elaborating on why it should not be considered an adequate stand-alone retirement, which is exactly what you are saying. YOU may know everything about this, but many people do not. I am greatly mystified as to why you wish to set us up in opposition to one another. The point of comparing SS to a traditional pension is simple: to show how the two are different. Some people do not realize this. Please do not feel I am trying to insult you by posting something you already know - that was not my point at all. It is indeed absolutely welfarish if a family of five receives more benefits than a family of two provided the two families paid the same premium. One is subsidizing the other. Of course no one objects if another person collects on insurance in this sense: Suppose we both have auto insurance and you have an accident but I don't. You collect (and that's why we both have the insurance, i.e., in case we need it), but I don't collect, and that's fine with me, because I don 't want to have an accident. I am totally at a loss as to where you are coming from; I sense this hostility but cannot guess its cause.
It is indeed absolutely welfarish if a family of five receives more benefits than a family of two provided the two families paid the same premium. One is subsidizing the other.
Of course one is subsidizing the other; that is exactly how an insurance pool works. And that is exactly why ss vis-a-vis health insurance is a more accurate comparison than ss vs. pension. I still don't see how you can call that "welfarish."
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Originally Posted by Escort Rider
I am totally at a loss as to where you are coming from; I sense this hostility but cannot guess its cause.
No hostility intended. I apologize if my post(s) came across that way.
An insurance pool is not welfarish if each person pays a premium reasonably related to the likelihood and magnitude of the potential loss to be suffered by the insurer. Examples of this would be auto insurance and home insurance. No one is subsidizing anyone even if some have losses and some don't, as each person is protecting himself against the same magnitutde of loss. However, if a person with a $200,000 house is charged the same premium as a person with a $500,000 house in the same neighborhood, that would be a subsidy, i.e., welfarish, because if both houses burn down one is receiving substantially more in settlement. So the health insurance premium charged to a family of five should logically and rationally be greater than that charged to a family of two, because the potential liability of the insurer is substantially greater in the former case. If the premium is the same, then this is welfare, regardless of whether it occurs in the public or private sector.
One issue is Social Security tax, and that isn't impacted by the number of exemptions you claim. It is a flat rate based on income.
The other issue is your federal and (if applicable) state income tax, and that is where exemptions impact the withholding.
Two entirely separate issues there.
When I worked for a pizza delivery business, many drivers did not claim most of their tips which was over 1/2 their income. So, they hurt their social security benefit by not having their entire income being subjected to social security tax. Alot of the drivers were college students so their employment was rather temporary, maybe 4 years so the negative affect was minimal.
SS is a voluntary insurance policy that was paid into by many people.
I paid into social security for 30 years and now that I am disabled it is giving me just enough to live on.
I have learned that if I had a child in my household under age 18, I would also receive a benefit of some calculated amount to help me support the child.
Another city data forum member suggested highly that this benefit paid for the child, would be welfare, and anyone who is disabled or on on social security (lots of older citizens become foster parents or adopt) would be letting tax payers support the child and are low life persons for becoming a parent of a juvenile child while on disability or S.S.
I paid into social security for 30 years and now that I am disabled it is giving me just enough to live on.
Which is exactly what it was supposed to do.
You paid into your insurance policy, and now that you have become disabled you are receiving a benefit from your policy.
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...
I have learned that if I had a child in my household under age 18, I would also receive a benefit of some calculated amount to help me support the child.
Another city data forum member suggested highly that this benefit paid for the child, would be welfare, and anyone who is disabled or on on social security (lots of older citizens become foster parents or adopt) would be letting tax payers support the child and are low life persons for becoming a parent of a juvenile child while on disability or S.S.
It seems to me that this is all about how much you paid into your policy, how it was invested, how much your account has grown to become and at what rate it is being paid out to you and your dependents.
If your total benefit is less than you even after you die, you will have left money in the pot for others.
If your total benefit is more than what you paid in, then clearly your taking money from the pot.
I was elaborating on why it should not be considered an adequate stand-alone retirement, which is exactly what you are saying. YOU may know everything about this, but many people do not. I am greatly mystified as to why you wish to set us up in opposition to one another. I am totally at a loss as to where you are coming from; I sense this hostility but cannot guess its cause.
I have personally been the victim of the same hostility by 3 particular members over and over, and it seems that is their purpose when they join a thread.
Confrontation, rebuttals, everything you say is wrong, almost to the point of them being bigots who are people who agree with no one ideas or feelings, and many times they are missing 99% of the facts when they make their accusations of selfishness and other cruel terms. It's a shame these types frequent these very helpful forums.
When I read your detailed explanation, I came away with ZERO negatives or impulses to bite like a snake.
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MadManofBethesda: "SS was never designed to be a stand-alone retirement program. It is meant to supplement one's retirement income."
If it was set up that way it is a total failure and those in retirement who are eating out of silver spoons need to contact the government or use the internet to search for the % of Americans whose retirement income is 100% social security.
Their are millions of American's who have no pension plan and they are living on social security exclusively for their income.
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Family of two vs. family of five
