Should High Earners Give Up Some of Their Social Security Benefits?

There is growing momentum that calls for Social Security benefits to be paid at a flat rate. This would be a huge departure from the current system.

As it stands, your Social Security benefit payment is based on three factors. These are:

  • How much income did you earn over your lifetime
  • The year in which you were born
  • At what age you decide to start taking money out 

This means that the average retired worker receives $1,500 a month in benefit payments from Social Security. The maximum benefit for someone at retirement age is slightly over $3,000.

As benefits are partly based on how much income you earn over your lifetime, those who earned more will receive more.

These benefit payments for high-income earners, while proportionally less based on the Social Security formula, are still of a greater magnitude than those benefits paid out to lower income workers.

The argument for “universal” Social Security — that everyone would receive the same income, regardless of working income — is that it would grant more assistance to people who live below the poverty line.

Of course, to make it work, those who earn a higher income would slowly see their benefits reduced. This kind of change would not happen overnight, and probably take a couple of decades.

Millennial dilemma

Millennials are increasingly planning for a retirement that doesn’t include Social Security. The Wharton School at the University of Pennsylvania predicts that the Social Security fund may run out as soon as 2032.

The Bipartisan Policy Center, a Washington D.C. think tank, believes the fund could be exhausted as soon as 2028.

In response, the Heritage Foundation, a conservative think tank, has formulated its own plan as to what universal Social Security should look like.

It would include a tax break if you are self employed.  Right now, Social Security is funded through a payroll tax.

Self-employed, since they are both the employee and the employer, put 12.4% of their wages into the Social Security trust fund.

“We estimate that you could reduce the 12.4% tax down to 10%,” said Rachel Greszler, a research fellow at The Heritage Foundation.

“A median household ($68,700 per year) would have an extra $1,580 income each year to spend or save as best for them.”

Recommended Articles

Is the 4 Percent Rule Viable for Retirement? Consider the Evidence

Is the 4 percent rule viable for retirement anymore? And if not, what should retirees do about it? For decades, the cornerstone of retirement planning has been the 4 percent

7 Personal Finance Myths Preventing You From Being Rich

If you are someone who is looking to get rich, the last thing you need is bad financial advice. And there plenty of personal finance myths. Unfortunately, there is a

Drink Less, Live Longer: The Latest Research

It is very common in society today to drink alcohol on a regular basis. Teenagers may drink at parties on the weekend because of peer pressure, while adults may enjoy a

Claim Social Security, Keeping Working…Or Both?

Officials within the Social Security Administration are floating the idea of raising the retirement age. Though no proposal is in play just yet, Congressional staffers are studying a rise in

when you do need a will

When Do You Need a Will? Almost Immediately If You Invest

When you do need a will? Pretty much the moment you own any assets at all, assuming you want to leave those assets behind to a loved one. According to

Lose 20 Pounds In Just One Month by Adding This to Your Morning Coffee

If you love drinking coffee in the morning and you happen to be trying to lose a few extra pounds, you’re in luck. Adding just a few simple ingredients into

A Small Change to Your Investing Could Reap Big Retirement Gains

Many financial advisors have recommended the time-tested 60/40 portfolio to investors for decades. The 60/40 portfolio, which calls for 60% of a portfolio to be invested in stocks and 40%

build wealth

5 Things You Must Do Now to Build Wealth

Everyone wants to be wealthy. However, it takes dedication and sacrifice to build wealth. Being wealthy involves adjusting your financial mindset about money. You must continually view money as a

Reflexology: Press These Points On Your Palm to Relieve Any Pain

Alternative medicine is becoming more widespread and commonly used by people all over the world. This is true especially when used to treat pain. Western medicine often relies on medications that

Tricky Social Security Scams Hitting Millions of Americans

Social Security scams are on the rise. The November Retirement Confidence Index from SimplyWise reported that 47% of Americans were targeted by a Social Security scam in a recent three-month

Here’s the Truth About How to Retire Early

While the rule of thumb is to retire at the age of 65, here's the truth: Most Americans retire at the age of 62. In fact, in 2017 the average

Sitting May Be Even Worse for Us Than We Thought

As a culture, we spend so much time sitting. Think about it: many of us sit in our cars (or on buses) on our commutes to and from work, we