SS Maximum contribution

[karen1972]

It will probably depend on whether or not you have other sources of income and where your average wage falls in the formula. As NW Bound noted, there's a "welfare component" that gets re-distributed to lower-income folks, who get more than a fair return on their contributions. Under the current formula, your benefit is 90% of the first $856 of the average indexed monthly earnings, plus 32% of the next $5,157, plus 15% of the remainder. You can see that lower-income people get a proportionately higher benefit. If you have other sources of income, such as pensions or investments, your SS can be taxed, too.

Right and I've already hit that 2nd bend point. The inflation adjustment on my early earnings actually boost several of those years higher than later years which is an interesting look into how the calculation is actually done. So no, I won't be seeing a very good return on my money which is fine as long as the rules don't change significantly before I can collect. At this point a minimum wage job would change my SS by a few dollars.. not exactly incentive to go find a part time job.

 

[NW-Bound]

A system that does not reward people for working harder or longer will get more [-]slackers[/-] early retirees.

People are not stupid, ya know?

 

[kgtest]

almost hit it last year... should hit it this year. Things are looking up. Not FIRE yet though....15more years to go. if I hit the limit the next 15years straight I think its safe to say i will be good.

 

[Pilot2013]

almost hit it last year... should hit it this year. Things are looking up. Not FIRE yet though....15more years to go. if I hit the limit the next 15years straight I think its safe to say i will be good.

Must have a big increase in income this year! limit is raised the most since I can remember (or have followed it). Good Job!

 

[aaronc879]

Wow. I didn't realize there were so many people that made such a large income. The most I have ever made in a year is $49K and that was big money to me. I saved over 50% of it.

 

[scrabbler1]

In reading the responses posted here, it is interesting how many people DID NOT, or rarely made the top limit during their working years. More proof of the "not how much you make, but how much you save/invest" and LBYM arguments.

We also have to remember how many of us had earnings which may not have been subject to FICA. Those would include the company match from a 401k plan, and an ESOP. For me, the company match was a slow, steady tax-deferred income source I have yet to tap into. But the ESOP was a very fast growing source which took place in the last 12 years I worked. On average, it added about $25k per year although it started off small and grew exponentially. Because most of it was NUA, I didn't get slammed on taxes when I cashed it out as I left the company 8 years ago. None of the income was subject to FICA, of course.

 

[jollystomper]

I have hit it every year since 1983 (when the earnings max was around $35.7K). I was fortunate to get into Information Technology right out of college and then ride the salary growth wave in the industry.

 

[Tadpole]

19 times out of 44

 

[N02L84ER]

I never hit it. DH hit it 9 years.

 

[rodi]

I only hit it once. When I changed jobs, got a signing bonus, and had a gross up for the Relo package.

 

[athena53]

A system that does not reward people for working harder or longer will get more [-]slackers[/-] early retirees.

People are not stupid, ya know?

I just did a quick calculation of what the last 5 years, contributing the max, did to my SS benefit. I'd worked 38 years, so each additional year would have taken a low-earning year out of the average and put in a higher-earning year.

It increased it by $50/month.

 

[Taxman59]

23 years of the max and several more close to it. Additional max earnings will make little difference to my SSI. It wasn't worth it to w*rk for the extra SSI when the FICA would nearly be more than the extra $$!

 

[GalaxyBoy]

When I was a young nuclear migrant worker I used to get 1.5x for OT, and all the OT I could stand (70 hour weeks weren't unusual). So I hit the limit in September.

Not so much later in life when I actually had a much higher salary, but worked OT for free.

 

[Cobra9777]

I exceeded the max 16 of the 25 years I worked at Megacorp. Those all came in the last 18 years. I also have 12 years of earnings records prior to Megacorp. I typically worked ~30 hours per week throughout high school and 8 years of college. I also have earnings records for a couple years after retiring due to vested stock options I exercised after retiring. Total 39 years of earnings.

44 years of SSA earnings (starting at age 17), 25 at the max. According to my records, my employers and I have contributed $312,000.

Some food for thought:
According to this website https://www.crystalbull.com/Social-Security-Privatization-Calculator/ my account would be valued at over $2,000,000 if I had invested both my employers and my contributions in the S&P500, and over $650,000 if invested in 10 year treasuries. So a 50/50 split would have yielded about $1,325,000...

I was curious, so I took the yearly rates from that calculator (SS contribution rates and S&P 500 annual returns) and put them in a spreadsheet alongside my SS earnings record. Resulting total contributions (including employer portion) were $257K. Using the S&P 500 annual return rates, the contributions would have grown to $946K (XIRR=8.7%). This is low compared to CardsFan, but most of my earnings came in the last 16 years and included both the dot-com disaster of 2001-2 and the great meltdown of 2008. Then I went to the bedrockcapital ssanalyze tool, which estimates the NPV of my SS benefit at $540K. This was using their default recommendation and assumptions, including longevity. Corresponding XIRR was 5.2%.

Interesting, but nothing earth-shaking in those numbers. It's about what I expected. Through most of my working career, I never assumed SS would be there when I retired. Then again I'm only 55, so there's still plenty of time for implementation of means testing or other forms of benefit cuts. Nevertheless, as I get closer to eligibility, I'm rather pleased to have the diversity of SS and a pension annuity in addition to investments.

 

[pb4uski]

Just looked at my "Your Earnings Record" on my SS statement. I graduated college in 1977 so my first full year of full-time work was 1978. My Medicare and SS earnings were the same through 1990... from 1991 to when I retired my Medicare earnings exceeded my SS earnings.. so 22 years of the 35 years that I worked I was above the limit.

I remember as I was climbing the ladder that I was thinking that if I ever got to the point where I earned more than $50k that I would be on "Easy Street". Ah, to be young and naive.

 

[pb4uski]

I just did a quick calculation of what the last 5 years, contributing the max, did to my SS benefit. I'd worked 38 years, so each additional year would have taken a low-earning year out of the average and put in a higher-earning year.

It increased it by $50/month.

Yeah... it gets to the point where it isn't worth working anymore.

 

[pb4uski]

....I am all for raising the limit ...

+1 I seem to recall that alone would make a big dent in fixing SS.... and as someone who maxed out for much of my career, I probably would not have noticed it and could have cared less.

 

[Dreamer]

Neither my DH or I did.

 

[bada bing]

+1 I seem to recall that alone would make a big dent in fixing SS.... and as someone who maxed out for much of my career, I probably would not have noticed it and could have cared less.

The ethics of "just removing the earnings cap" are atrocious. If you consider that SS has an unearned "Welfare" component subsidizing low earners and for various beneficiaries who didn't "earn" their benefit and it also has a contributory retirement component - then - the entire burden for the "welfare" component is paid for by just upper wage earners. If the "welfare" component is a public good (I think most would agree although perhaps quibble on the magnitude), then it should be paid for from public budget. Upper middle class workers shouldn't be forced to pay the entire burden for lower middle class workers. Raising or eliminating the cap is just adding insult to injury for an existing bad funding mechanism. I don't like getting into class warfare (because I mostly don't agree with it), but the whole SS program with it's regressive payback from taxes only on "earned" income must have the .1%ers laughing at getting totally off the hook on the biggest welfare entitlement program there is.

 

[CardsFan]

The ethics of "just removing the earnings cap" are atrocious. If you consider that SS has an unearned "Welfare" component subsidizing low earners and for various beneficiaries who didn't "earn" their benefit and it also has a contributory retirement component - then - the entire burden for the "welfare" component is paid for by just upper wage earners. If the "welfare" component is a public good (I think most would agree although perhaps quibble on the magnitude), then it should be paid for from public budget. Upper middle class workers shouldn't be forced to pay the entire burden for lower middle class workers. Raising or eliminating the cap is just adding insult to injury for an existing bad funding mechanism. I don't like getting into class warfare (because I mostly don't agree with it), but the whole SS program with it's regressive payback from taxes only on "earned" income must have the .1%ers laughing at getting totally off the hook on the biggest welfare entitlement program there is.

Sorry to disagree. As one who exceeded the cap for many years, I often commented that raising it would be a simple way to fix the system. Don't get me wrong, I enjoyed the savings. But it would not have been a huge imposition to pay more.

SSI is regressive/progressive (depending on your point of view) for a reason. And I do not mind paying for that, I can/could afford it.

I do believe that SSI has been expanded beyond it's intentions. Not that the need is not there, but it should be handled seperately. But this is the system we have.

FWIW I am NOT a fan of bigger government, or higher taxes, but sometimes simple solutions are best for all.

 

[NW-Bound]

What bada bing suggests is that the retirement component and the welfare component should be separated out.

The retirement part should become something like IRA, 401k, 403b, or FERS, and portable from job to job. Person A who puts in twice as much as Person B because he works harder or longer should get out twice as much. That money is his, and the system cannot change its mind and decides to make him share with someone else later, or takes it from him.

The welfare portion should be something like the Australian system, means tested and sufficient for a low-income retiree to live on. And it should be funded by the general income tax, which will be levied on not just earned income but also dividends, capital gains, etc... This way, the 0.1-percenters who get lots of unearned income will have to pitch in also.

By the way, I can see that the basic minimum retirement pay should be tied to the minimum wage. Perhaps it should be less because a retiree who stays home does not incur the same costs as someone younger who has to leave the home to go to work.

This system guarantees a certain minimum income for workers without skills, and also for retirees without means. Nobody goes hungry or homeless, but it will be a basic life. If you want more than that, you will have to work harder, longer, smarter. Want twice the money? Then work twice as long.

 

[CardsFan]

What bada bing suggests is that the retirement component and the welfare component should be separated out.

The retirement part should become something like 401k, 403b, or FERS. Person A who puts in twice as much as Person B because he works harder or longer should get out twice as much. That money is his, and the system cannot change its mind and decides to make him share with someone else later.

The welfare portion should be something like the Australian system, means tested and sufficient for a retiree to live on. And it should be funded by the general income tax, which will be levied on not just earned income but also dividends, capital gains, etc... This way, the 0.1-percenters who get lots of unearned income will have to pitch in also.

And if we could revamp the entire system overnight, the concept has merit. In the meantime, the system we have is what we deal with.

Keep in mind, the 0.1 percenter's know how to control income to limit taxes even better than the millionaire's here know how to control income to get an ACA subsidy.

Anyway you cut it, the only way for the government to get significantly more money is from those of us in the middle.

Again, I am not a huge fan of the current system, but this is what we have.

Full Disclosure: I am recently retired so I have no W-2 wages, and do not pay SS tax, but this has been my opinion for many years, when it would have cost me money.

 

[NW-Bound]

We tax the heck out of a doctor making $200K, but a person making $200K off cap gains and dividends gets off much easier. The doctor pays more income taxes, and SS too.

I think that it is not right that a worker has to pay higher taxes than a person living off the income from investment gains. And I say this even though I am now a retiree. It reeks of the old time, when landlords (someone with capital) have it easy while the workers (someone with just labor) toil and sweat. Without some workers' labor, my capital is not worth much.

 

[pb4uski]

The cap gains and dividends are the result of after-tax corporate earnings... that money has already been taxed once at up to 35% before it gets paid to the investor... that is why those types of income get preferential tax rates.

The employer of the doc gets to deduct what they pay the doc and get a substantial tax benefit... so what the doc pays essentially replaces the tax benefit that the employer gets.

 

[growing_older]

I have 42 years of earnings and 32 years of those are max'ed. I plan to work another 3 years (retire at 61), if I can stand it, which will bring me to 35 years max'ed (a max'ed max).

If your new year of max earnings replaces an old year of almost max earnings, that $7000 Social Security tax may only be buying you $2 of monthly benefit.