You Might Be Paying More Into Social Security Than You’ll Get Back

Wednesday, 24 Apr 2013 08:12 AM

By Michael Kling

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Image: You Might Be Paying More Into Social Security Than You’ll Get Back
Blank Social Security checks are run through a printer at the U.S. Treasury printing facility in Philadelphia, Pennsylvania. (Photo by William Thomas Cain/Getty Images)
Many workers are paying more into Social Security than they’ll get back, reports CNNMoney, citing research from the Urban Institute.

For instance, a couple with average wages who retired in 1990 would have paid $316,000 in Social Security taxes, but would have collected $436,000 in benefits.

If they had retired in 2010, they would have paid $600,000 over the course of their careers, but expect to receive only $579,000.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

And that trend will grow for future of retirees. Couples in their early 40s now should expect to pay $808,000 into Social Security in return for $703,000 in benefits.

Payments to early Social Security beneficiaries increased, CNNMoney noted, but taxes for those higher benefits did not rise until after the program was reformed in 1983.

“Younger generations are paying much higher tax rates for the same benefits,” Eugene Steuerle, an Urban Institute economist, told CNNMoney.

Some couples will still receive more than they put in. For instance, lower-income workers usually receive more than they pay in. Also, women often have lower incomes than men do or take years off from work for childcare, but a wife will get more than she paid in because her benefits are based on her husband’s earnings.

While the number of older Americans retiring grows, there are fewer younger people working to pay for their benefits.

“What we are paying into the system is paying for our parents’ benefits,” Steuerle said. “But it’s not clear what that entitles us to get from our kids.”

Allowing more immigration is a solution to the Social Security dilemma, according to Baltimore Sun columnist Susan Reimer. The problem is not the large number of aging baby boomers.

The underlying problem is that no matter when they were born, people are living longer and the birthrate has fallen from about 3.3 children per woman to about 1.9.

Effective birth control may have prompted lower birth rates, Reimer wrote, as women have long said they prefer two children.

More immigrants would mean more workers paying taxes for current beneficiaries. There were about 4 million babies born last year and about 1 million immigrants came into the country, effectively equaling a birth rate of 2.5.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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