For people who are not
self-employed, 12.4% of gross income is contributed to Social Security.
6.2% by the employer and 6.2% by the employee. So, to place it in
perspective, for every $1000.00 a person earns, $62 goes into SS from a
person's paycheck and their employer pays in another $62.
Here is my take on the
benefits and the drawbacks of opting out of paying into Social Security...
The benefits of
continuing to pay into SS:
-6.2% is employer paid.
-employees would keep
their full SS benefits (contingent upon how much Congress decides to pay)
-PERA employees
would keep a good amount of money that was paid into SS as opposed to only
receiving back 3 years worth from the IRS if they opt out.
-Most people aren't
responsible enough to save or invest if there were no SS tax.
-Older employees would
not see a reduction in benefits even if they joined PERA after
1999.
-SS has been, and can
continue to be beneficial as supplemental income for millions of people.
-SS is income insurance
for when people stop or no longer can earn an income.
The benefits of Opting
out of SS:
-6.2% more money to
invest in a pre-tax IRA (deferred comp.)
-money paid into SS prior
to joining PERA would still be available.
-You would have more
money that would not be controlled by government bureaucrats to squander.
-SS is controlled by
congress, bureacrats decide how much you will be paid out per month and when
you should get a cost of living adjustment. Funds in an IRA and personal
savings are controlled by the individual, not the government.
-SS payouts are taxable
income, (so you would end up paying taxes on a tax, (which seems a little
asinine to me) as opposed to post-tax investments such as a Roth IRA.
-The SS fund is currently
used to fund retirees, disabled people and the children of disabled
people, and, for some reason, to pay back Treasury Bonds, to fund
wars, subsidies, and other government programs.
-By 2033, the SS fund is
projected to be depleted.
-SS grows at a rate of
approximately 4.4% from bond interest, while the stock market has grown an average of approximately
10% over the last 50 years despite the crash of 2008-09.
-with compounding
interest, which equates into higher growth on money you control, taking
the money you would have paid into SS and investing it in good growth stock
mutual funds that have a long track record of growth would, and should, yield
exponentially more money than placing it in the hands of Congress.
-with only an estimated
49% of the U.S. population paying income taxes, how can SS be sustained?
On my last pay stub, the
amount that I paid into OASDI\EE amounted to $184.44. That is $184.44 I
could have placed into my deferred compensation accounts, or $138.33
into my post-tax Roth IRA.
Honestly, does anyone
feel comfortable with the government managing their money, placing it into
an insolvent fund when there is annual deficits and over $17 trillion in
national debt? I personally do not. The benefits of opting out, for
me, far outweigh the benefits of continuing to pay in. Forget the so-called
"three legged stool" of SS, savings, and investments, I would rather
stand on my own two legs with savings and more to invest!
Contributed by Noel Schlitter
