Tags: Sloan | Social | Security

Allan Sloan: Social Security 'Means Testing' Already Here

Monday, 05 March 2012 07:52 AM

The notion that Social Security can be fixed by cutting off benefits to wealthier Americans sounds attractive on the face of it — except that it’s already happening, says Fortune magazine financial columnist Allan Sloan, writing in The Washington Post.

He calculates that he and his wife, despite qualifying for full benefits at his age of 67, will get just 35 cents on the dollar paid in over a half century of work.

About a quarter of the loss comes from the design of Social Security, Sloan writes. That’s because the system is meant to replace 90 percent of wages for the poorest contributors, then ratchet down from there. Sloan figures he will only get 28 percent of his wages, since he is a high earner.

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Because he has other retirement income, Sloan and his wife pay taxes on their Social Security income, by his calculation giving 30 percent of the supposed benefit right back to the fund via the IRS.

Since he still works, add in normal payroll tax, and the result is that Sloan realizes just 35 percent of the money he has put in over years and years.

“Eliminating payments to retirees with incomes above a certain level would make more available to folks in need. Those greedy rich need to pay their fair share, right? But here’s a dirty little secret: Social Security is already seriously means-tested. And my situation shows it,” Sloan writes.

Some adjustments are reasonable to maintain the system, Sloan contends. “But don’t strip me of my benefits, for which I’ve paid 50 years of taxes, just because I’ve worked hard, saved and succeeded financially. That would make me furious,” he writes.

Benefits are likely to be scaled back by budget reality in any case. The Social Security Administration (SSA) has said that the fund will run dry by 2036, but newer projections from the Congressional Budget Office (CBO) show that the SSA numbers are off by tens intro hundreds of billions each year.

The CBO projects that the SSA Old Age and Disability Trust Fund will be $797 billion lower than the SSA believes by 2020, totaling $2.80 trillion rather than $3.59 trillion.

Meanwhile, the SSA has steadily decreased its “run dry” date since the crisis began, predicting five years ago it would be broke by 2041 but saying 2036 just last year.

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

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