SPRINGVILLE — Wallets and piggy banks lay empty, in the weeks following Christmas, and many of us prayed that our generous spending over the holidays would be forgiven by the first paychecks of the year.
But I swear I heard a collective gasp from America’s workers, as envelopes were sliced open on payday and a chunk of income was found to be missing. My own dismay was echoed, 100-fold, as Americans took to social media, to cry together about the nasty trick pulled on them over the new year.
Two years ago, President Barack Obama temporarily cut workers’ share of the Social Security payroll tax, from 6.2 to 4.2 percent. But, when Americans said good morning to 2013, they, wittingly or not, welcomed back their 6.2 percent portion of those contributions.
Who really needs $1,000, per year, anyway? That is the number Businessweek contributor Nick Summers said workers’ making $50,000 in 2013 will now lose, on an annual basis. In addition to the amount they were already putting into Social Security. Not to mention the other funds squeezed out of them, for state and federal taxes.
The end of the payroll tax holiday, which was intended as a boost to the economy, was heralded as a “form of anti-stimulus” by Businessweek and “the highest tax [burden] since 2008, for most U.S. households” by The Wall Street Journal. When Congress voted down an extension to that holiday, losses were immediately seen in paychecks around the country.
While the increase applies to all workers, the middle and lower classes will feel it the most. The tax applies to only the first $113,700 an individual earns. “A person making $1 million pays $7,049, the same as a person making $10 million,” according to Businessweek. So the little guys are shouldering comparatively huge burdens, while those who are already sitting pretty can count their blessings that the government is being so considerate to them.
These tax monies are being thrown into the pot that is known as the Social Security Trust Fund, which is made up of disability insurance (listed as either OASDI or FICA on paychecks) and old-age and survivors insurance.
That’s fantastic news for anyone who is currently drawing Social Security or who hopes to, within the next 20 years. But Americans who have entered the work force since approximately 1985 have been warned to not expect the same benefits as their more seasoned counterparts. Financial experts disagree as to whether or not the United States government has an actual trust fund for Social Security and how long that pot will last, but the general consensus is glum, for workers aged 50 and younger.
The Daily Finance claimed that Social Security is already paying out more in benefits than it receives from taxes, growing – to bank up, for those not currently drawing from it – from only the interest that it pulls from its treasury bonds, an assertion supported by the Social Security Administration itself. “Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983,” according to the 2012 annual report. “These expenditures will remain greater than non-interest income, throughout the 75-year projection period.”
Guesses have been tossed around as to what year the Social Security trust fund will run out. Last year, the Social Security Administration’s trustees report summary said that the trust fund’s reserves will be exhausted in 2033, “three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about 3/4 of scheduled benefits, throughout 2086.”
Those of us who will not be eligible to draw Social Security until many years after that 2033 date are still contributing to the trust fund at the same rate as those who are projected to draw the full benefits. Our wallets were hit just as hard and our bank accounts are just as empty. But our payout will most likely be significantly lower.
Anyone who hasn’t been living under a rock is far too familiar with the state of America’s economy, so the prospect of working well past age 66 is not a new one. But the shocking actuality of staring at a shrunken paycheck was, as Credit Suisse Analyst Edward Kelly described it, “like a splash of cold water.” Especially when the stark reality is, many workers will never see a return on that particular investment.
to find out how much you may owe in April 2014.