Archive for Social Security

History on Social Security

From 1800 to 1929 Americans lived through 23 recessions and 4 depressions, or one every 4.8 years. After the depressions in 1929 more people began to look to the government for assistance.

In 1930 Senator Huey Long of Louisiana proposed a program called “Share the Wealth”. Here the Federal Government would “confiscate” the wealth of the nation’s rich to “guarantee” an annual income of $5,000 to every family ($5,000 in 1930 equates to $69,000 today)… Sad part of this sick idea is that once you take all the wealth from the top earners… where will the government get the money for this program in ensuing years? Duh! The whole thing sounds very Marxist!

In 1932, FDR imposed a massive government expansion focused on the “Three R’s” … relief for the poor, recovery for the economy and reform of the financial system (sounds a lot like Obama’s proposals). There were cries from Congress of socialism as it was pushed and rushed through Congress with debates over the constitutionality of the program (sounds just like the show during Obama Care). Ah, the more things change… the more they stay the same!

FDR responded to these delays by grabbing new presidential authority out of the hands of Congress, including appointing new judges he wanted in districts where the judges refused to retire. He appointed 44 lower court judges and six new justices to the Supreme Court which tipped the political scales in his favor.

FDR then resent the “Social Security” and New Deal program to the Supreme Court where it was approved. Congress is allowed to collect taxes for the “general welfare of the United State”. Hence the contributions by employees and employers were considered a tax, thus, making it constitutional. A crafty piece of illusion and similar to the court ruling on Obama Care.

Withholding History

    In the first twelve years of the program a 1% tax was withheld from employers and employees. In 1950 the rate began to rise until it peaked at 6.2% in 1990. In 1965 Medicare was added in to the program with 0.35% tax for both sides. Presently, each side contributes 7.65% for a total of 15.3% of wages.

Mortality History

    A major threat to the viability of Social Security in the increase in American’s longevity. Back in 1940 a 65 year old male had a life expectancy of 12.7 years (to age 77.7). A female could live to 79.7 years. A study in 2009 showed a 65 male can expect to live to 82.5 years and a female to 85.2 years. So the payout period is lasting longer. The improvement in mortality comes about by socioeconomic status. Thus upper income earners enjoy a longer life expectancy as well as improvement in longevity. The affluent have better access to health care, do not participate in excess use of illegal drugs, alcohol and nicotine products. Also, they tend to be more forward looking and goal oriented resulting in a healthier life style.
    Taxation of Social Security

    Prior to 1984 Social Security benefits were exempt from federal income taxes. In 1984 as much as 50% of one’s benefits became subject to tax. In 1993 a new 85% level was added.

    The amount that is taxed is based on the person’s filing status and modified adjusted gross income (MAGI) also known as provisional income. The thresholds are: (1) No amount of Social Security being taxed, (2) 50% being taxed or (3) 85% being taxed. These thresholds were established years ago and are NOT indexed for inflation. This simply means more people each day are being trapped at 85% subject to tax.

If you would like to learn more about how to double your Social Security benefits while reducing your retirement taxes by more than 80% … watch my YouTube video and then request your free report.

An Idea for Social Security

The future funding problems of Social Security could be solved by an old idea. Invest a portion of the Social Security Trust fund in a stock market index fund, rather than putting it all in U.S. Treasuries.

At the end of 2012 there was a $2.732 Trillion surplus in the fund. All of it was invested in Treasury debt that does not even keep up with the inflation rate. The surplus monies, in the Trust funds, have been “borrowed out” by our legislators to fund the voter’s hand outs that are enjoyed today.

Therefore, in the future the U.S. Treasury will have to borrow $2.732 trillion from the public (or foreign countries or the Federal Reserve) to repay the borrowings. Under the “static” scenario all the monies will be gone by 2035. The present value of the next 75 year shortfall will be $9.6 Trillion (Don’t you just love what a socialistic program does for your pocketbook?)

What are some options to fix this: (1) Increase taxes or (2) reduce benefits… both politically devastating. Ten years ago George W. Bush proposed privatizing a PORTION of Social Security. The outcome: The media and the Democratic House and Senate nearly lynched him. The public, on the other hand, did not make any noise to save their own fate.

A third option is to index a portion of the Trust fund into a broad spectrum of U.S. common stocks. It is not privatization nor individual ownership. Rather, it is investing a portion of the monies into a diverse common stock index.

Some people say investing in the Great Companies of America is a gamble. Social Security, in its present state, is not a gamble??? It is a bet that has already been lost. Historically, long term indexing would have increased Social Security assets compared with equal investments in Treasuries over any investment horizon.

Yes, there have been periods during which there were no real gains in the stock market (1929 – 1954 and 2000 – 2013). This program would be using the power of dollar cost averaging. In addition, the effect of dividend reinvestment would have been overwhelmingly beneficial. The S&P 500, exclusive of dividends grew 94 times from 1935 to 2011. When you add in the dividends, over the same time period, the increase “was” 1,686 times.

The opposition to this idea will come from your Washington representatives. All they know how to do is raise taxes. It goes back to the old adage: If you only own a hammer, then, you see every problem as a nail.

Write to your representatives on this idea on indexing, now, so things will be “right” for you later!

Please watch our webinar on “How to double your Social Security benefits while reducing your taxes by 80% in retirement”

Recipients Regret Taking Social Security Early – New Numbers illustrate benefits of delayed claims

This is an excerpt from an article written by Mary Beth Franklin a contributing editor for Investment News.

Regrets often come from opportunities not taken, but new evidence shows that sage advice most often does not apply to claiming Social Security benefits early.

Financial advisers sometimes struggle to get clients to understand that while Social Security benefits become available at 62, waiting until at least 66 and optimally 70 results in more retirement income. New numbers help illustrate why.

Nearly 40% of retirees who claimed Social Security benefits before full retirement age now regret their decision, according to a new survey released last Wednesday.

Retirees can claim Social Security benefits as early as 62, but their benefits are permanently reduced by 25% compared to waiting until their full retirement age of 66 to begin benefits. Those who are willing to wait even longer earn delayed retirement credits worth 8% per year for every year they postpone benefits up to age 70, increasing their benefits by an additional 32%.

The survey from Nationwide Financial Retirement Institute reveals that 38% of retirees say they wish they would have waited to collect Social Security benefits, resulting in a larger monthly payment.

“When and how to claim Social Security is one of the most important financial decisions retirees make in their lifetimes,” David Giertz, president of distribution and sales for Nationwide Financial, said in a statement accompanying the results of a Harris Interactive survey of more than 900 current and near-retirees 50 and older.

“The key theme throughout our survey is how crucial it is that Americans work with a financial adviser,” Mr.Giertz said. “Optimizing Social Security benefits is an important part of a holistic retirement plan.”

Those who don’t take steps to maximize their benefits may be missing out on thousands of dollars per year in additional income. For a married couple, the right Social Security claiming decision can increase their lifetime benefits by $100,000 or more.

The Adviser Difference

The survey found that retirees working with an adviser are more likely to be able to afford to do the things they want to do in retirement by a margin of 82% to 62%. Those working with an adviser also had a better handle on how much they could realistically expect to receive from Social Security in retirement. Only 12% of those working with an adviser said their benefits were smaller than expected. By comparison, more than one-third of those without an adviser said they were disappointed in the amount of their Social Security benefits.

However, only one in 10 respondents – representing both current and future retirees – said their adviser gave them advice on when and how to claim Social Security benefits.

Expectations are changing, though. More than half of future retirees – 56% of respondents who are not yet retired – said they expect their adviser to guide them in the crucial choices of when and how to claim Social Security benefits. And 81% of future retirees said they would switch advisers if they didn’t get help maximizing their Social Security benefits.

Would you like to learn more on this subject? Watch our free webinar “How to double your Social Security benefits and reduce your taxes by 80%”. You can see this by hitting the link When done contact our office at 713-871-5919 or to make an appointment for a free personalized report and presentation.


Minimize Social Security Taxes

Your Social Security Income might be taxed depending on your other retirement income sources. In general, married couples filing jointly…50% of the Social Security benefits are taxed for those earning between $32,000 and $44,000 (for singles it is $25,000 and $34,000). Above $44,000, for married couples, it is then taxed at 85% (for singles the 85% level kicks in above $34,000).

Now, there are planning strategies for you to reduce your taxable income during the “Social Security years” down to a level of about 10% to 15% of what most people will actually pay in taxes.

Watch for information on a new webinar I am creating to show you how to do this.

Paying more Social Security Taxes

Baby Boomer readers may remember that in your first job Social Security (SS) was basically a small nuisance tax. That is, you slapped it aside like a slow gnat on a lazy summer afternoon. In the late 60’s to early 70’s you paid Social Security taxes until mid February of each year. The small amount of taxes was paid by the 2nd month of the year. Why was the tax so small then and now you pay 7.65% up to $113,700 in 2013. Back then, the payout was only used for people on Social Security or Disability. Today, one in 4 Americans are drawing on the system since there are so many ways to tap into it while the “workers” funding the system are getting fewer and fewer.

Here are some statistics to ponder since the demographic trends are as predictable as the rotation of the earth.

  • In 1900, 1 in 24 Americans was over 65. In 18 years, 2031, it will be 1 in 5.
  • Our Nation in the future will look like the demographics in Florida today.
  • In 1960, there were 5 workers for every retiree. By 2025, 12 years from now, it will only be 2 workers per retiree. So, if each retiree gets, say, $20,000/year in benefits…each worker (2) will have to come up with one half, or $10,000/year. How much are you paying now in SS taxes? The bad news! There are 10,000 new retirees each day, which means 10,000 fewer workers contributing daily, so, the remaining workers (you) will have to pay even more in taxes.
  • In addition, Medicare, Medicaid and Children’s Healthcare made up less than 15% of federal spending in the past. Today, it is in excess of 22% of spending and growing at geometric levels. These are at unsustainable levels.

***You had better begin immediately a massive program for yourself to fund your own health and retirement benefits since these programs will be “means” tested. Seek professional financial planning help immediately.

  • Additionally, people have a longer lifespan. People can expect to live at least 10 years longer than their parents, which will cramp the Social Security System even more.
  • The policies of the present Administration have taken away high paying jobs so there is less available for you to save unless you cut back your lifestyle now.
  • Defined contribution plans (401k, IRA, 403B, etc.) have replaced the old pension plans. These programs are subject to market volatility and extreme losses about every 4-5 years. That’s less money in your retirement cookie jar.

So, prepare for more Social Security taxes. Get help from your advisor in alternative methods that the wealthy are using to fortify their retirement savings and to avoid depending solely on SS.  

As always, we are here to help you at anytime.