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You should be able to find several indispensable facts about social security tax in the following paragraphs. If there’s at least one fact you didn’t know before, imagine the difference it might make.

Every week that you work, there are taxes deducted from your gross payroll that are distributed to the Social Security Administration, along with other programs administered by the government. Of all the taxes we pay, social security is one of the most beneficial, one of the most watched. Why do we pay social security tax, and what does it potentially mean for all Americans? The following article discusses the social security tax regulations and what we benefit from the mandated deduction.

Social security tax is deducted from our payroll each week in order to cover a portion of our retirement income when we reach age 65, but also a survivor benefit, should we become disabled during the course of our working life, or die as a result of work-in which case the surviving spouse and children would receive a monthly income supplement to help them with their daily expenses.

Each and every day, we are bombarded with statements that want to make us aware of the dire straits our social security system and the gloom and doom picture we face in just a few years. This article examines the information available about our social security system, and asks the questions about its fate and ours.

The social security tax we know and pay today has become a greater chunk of our income with the passing years. And, as if this is not enough, it is the poorest of this nation that pay the most, since there is a cap on the income levels that are subject to the social security tax. Currently, any income above $90,000 isn’t subject to social security tax. This presents a problem for the nations poor and the federal government’s level of social security tax received. As more and more of our population begin to age, there are fewer and fewer based employees to sustain the fueled growth and maintenance of the social security system. Add to this the fact that individuals with wage earnings beyond $90,000 are growing faster than the wage base for employees who remain below the $90,000 level, and you have the makings of a disaster. The latest predictions place the collision date somewhere around 2017. That’s not an extremely distant future, and it certainly will be a problem for the 45-50 year old wage earner.

So what has been proposed to deal with this growing problem? There are currently several proposed solutions to the problem, and all of them, with just a few exceptions point to higher taxation of the wage earners income. It is interesting to note here, that when income tax and social security, Medicare, and the many other “beneficial” programs the government has implemented to aid the general public, we have lost in the area of disposable income. In 1913, when the income tax program was begun, less than 1% of the average individual’s income was taxed. Today, we pay roughly 10% of our income in tax. That’s a staggering rate of growth, when you consider that our income levels have also tremendously increased too. The following paragraphs briefly outline some of the more popular proposals for dealing with the projected shortfall, and the effect it should have on “Joe Citizen”.

The information about social security tax presented here will do one of two things: either it will reinforce what you know about social security tax or it will teach you something new. Both are good outcomes.

Increases in FICA taxes; of course, this is a hard sell in the current climate, but by the time we reach 2017, it might look like a better solution than any of the others.

Increases in normal retirement age (NRA) have already begun, and it looks like it is going to be an ongoing process. As our life expectancy increases, the ability of social security to accommodate greater payouts, and a reduction in the working population continues, extending the NRA on past the age of 70 is a real possibility.

Privatization of social security; although on the surface this looks like a promising solution, it would take a special kind of citizen to intelligently, objectively, and rationally invest their 4% allocation wisely, and truly reap the benefit that social security has previously provided.

Selling bonds or printing money. The US Treasury does have the option to intervene and raise the money to accommodate the excess demand, but you increase the probability of runaway inflation when you begin to pump excess money into the economy.

What is the ultimate solution for this problem? No one really knows, simply because no one can accurately predict long-range models. 20, 30, of even 40 years into the future, accurate predictions are extremely hard to come by.

That’s how things stand right now. Keep in mind that any subject can change over time, so be sure you keep up with the latest social security tax news.

On June 8, 1934, President Franklin D. Roosevelt announced his intention to provide a program for Social Security. It was his goal to help protect millions of workers from poverty in their senior years. Over the years many changes have taken place and Social Security is very different from the original plan. Here are the top ten reasons that Social Security isn’t the best way to plan for your retirement.

1. There is no money left in Social Security’s Trust fund. The original plan was for people to voluntarily put money into an insurance plan. The money was then put into a Trust Fund that would be used only for paying retirement benefits. If more money was taken in than paid out the balance would be placed in an interest bearing account. During President Lyndon Johnson’s administration, the funds were made available for use in other government programs. For years Social Security has taken in more money that it has paid out; but instead of saving this surplus, the government spends the money and writes the Trust Fund an “IOU,” a special issue government bond to be paid back starting in 2017. The problem is that when the money comes due, it will still have to come from somewhere – taxes.

2. Social Security is subject to double taxation. Originally, the plan was to have the money paid into the program be tax deductible for income tax purposes. During the Clinton Administration, Social Security benefits became taxable. Now, you pay income tax on the money that is deducted from your pay check that goes into Social Security. Then when you receive it, you may be taxed on all or part of your benefits if you have other income besides Social Security. You have now been taxed twice on the same money.

3. Social Security is not enough to live on. Even if you work hard your whole life and pay into Social Security, there is a very slim chance you will have enough to live comfortably in retirement. I know of a woman who spent most of her adult life raising her family. At age 50, she will have to work until she is 70 to receive $566 per month. No one can live on $566 per month.

4. High Social Security taxes prevent many people from being able to accumulate a savings account. Social Security and Medicare taxes are 15.3% of earned income. With inflation at an all time high, few can afford to put away anything extra.

5. The current system is not fixable. The only way to fix Social Security’s problems is to raise taxes. This would have a major impact on average worker’s household budgets, would cost hundreds of thousands of jobs, slow the economy, and take a bite out of any personal savings. Although hire taxes might relieve some of the problem, it most likely would not solve it, leaving the potential for future tax hikes.

6. Money is better spent in the hands of the people rather in the government’s hands.

7. Social Security is not secure. As has been proven in the past, the laws and rules that govern Social Security change according to who is in office at the time. As new elected officials come in, new ideas come with them and change occurs.

8. As More people retire and live longer there are less people paying in. In 1950, there were 16 workers paying Social Security for every retired person receiving benefits. Today there are 3.3 per retiree. By the year 2020, there will be 2 workers paying in per retiree.

9. The more you make the more you pay. In the original program, participants would only have to pay 1% of the first $1,400 of their annual incomes into the program. Today, individuals must pay 15.3% of the first $94,200 and 2.95% on the rest of their income.

10. Being self employed gives you the choice between paying into Social Security and investing in yourself. For most of human history, people lived and worked on farms in extended families and this was the foundation of economic Security. They were self employed. As they grew older, children took over the family business and the retiree continued to receive income and benefits until death. When the Industrial Revolution developed, more and more people worked for other people. When they retired there was no more income. Thus Social Security was created. Today is no different than earlier times. If you own your own business, you can either have a family member take over the business or hire someone to run it when you are ready for retirement. You can receive income until you die and then you can Will the income to your heirs.

So, how does one solve the Social Security dilemma? Start a business that can continue to provide for you even after you are ready to retire. The best way to do this is to turn a hobby or interest into a business. There are many things you can deduct when you own a business that you cannot deduct ordinarily. For example, lets say you have a hobby of wood working. You have a room in your home and many tools you have purchased and you love to tinker and make decorative items out of wood. If you turn it into a business, now you can deduct all the tools and supplies you use to make the items. The room you use in your home can be deducted by claiming a percentage of the rent, interest, taxes, utilities, insurance, and repairs to the house. All of those things you are going to pay for whether you have a business or not. Much of your travel expense may be deductible now. As you travel to visit your children and grandchildren you can make the trip deductible by checking on new ideas and materials that will improve your products, attending trade shows, etc. You may travel to craft and trade shows to sell your products. If you choose to sell products over the internet, your internet costs will now be deductible. The list goes on and on. By making these things tax deductible you can limit what you pay into Social Security and invest that money in your business or a savings program of YOUR choice.

Owning a business is a good alternative to the current popular retirement plans. After you retire, you can keep doing what you love and create income to supplement your retirement and still keep tax deductions that most people loose in their retirement years. If you choose a business that you can train others to do, then that business can produce income after you stop and generate passive income to supplement your retirement. Owning a business gives you control over your quality of life when you choose to retire.

It is the Great Depression of the ‘30s that necessitates the creation of a Social Security program in the US. Poverty reaches its highest peak among older citizens that time and something has to be done.

The Social Security Act, which is considered the first Social Security law, was drafted under the administration of President Roosevelt. It was signed into law on 14 August 1935.

The act addresses many issues, amongst which includes:

• Old age

• Poverty

• Unemployment

• Survivors

• Disability

The Social Security Administration (SSA) is the government agency tasked to administer the program. Later on, it added health insurance benefits in the scope of the Social Security under the Medicare program.

Generally, benefits under the Social Security law are paid based on the workers’ employment record and social security taxes or contributions.

The Social Security Act evolved during the past years as new social and economic issues emerge. Changes were made to provide more protection and coverage for the Social Security members.

The so-called OASDI or the Federal Old Age, Survivors and Disability Insurance pays monthly benefits to the following qualified individual/s:

• Retirees

• Family of a deceased worker

• Unemployed worker due to illness

• Unemployed worker due to accident

Nowadays, the major coverage handled by SSA, where qualified members are entitled to benefits under the Social Security law, are the following:

Retirement benefits

This benefit is given to a worker who worked and paid Social Security taxes upon retirement. The worker earns credits during the time he was working. His entitlement to benefits and the amount thereof will be based on his earned credits.

The number of required credits depends on the year the worker was born. If he was born in 1929 or later, he will need 40 credits or an equivalent of 10 years of work.

The amount receivable will also vary depending on the worker’s retirement age. If he opted to retire early at the age of 62, his benefits will not be as high when he retires at older age.

Disability benefits

The SSA pays disability benefits under two programs: The Social Security disability insurance (SSDI) and the Supplemental Security Income (SSI).

SSDI is paid for people who were incapacitated to work because of a medical condition that is expected to last at least one year or result in death.

Members of the family of a disabled worker can also benefit under this program.

It is SSI program which will be applied for payments to people with low income who are 65 years of age or over or are blind or have disability.

Survivor benefits

Like retirement benefits, survivor benefits are based on the accumulated credit earned by a worker, during the time he was working and paying Social Security taxes.

The family of a worker is entitled to receive this compensation in the event the working member dies.

Medicare

This is a health insurance program available for people 65 years of age or older. It is also available for person under the age of 65 with certain disabilities and any age with permanent kidney failure requiring dialysis or a kidney transplant.

To know more information regarding social security benefits and other claims, you can consult with our experienced Los Angeles social security lawyers. You can visit our website to avail of our free case evaluation.