Now About Social Security and Medicare...
(and I hope I'm flogging a dead horse!)
Most working Americans pay into Social Security at a rate roughly 6.2 % of their gross paycheck. That amount is matched by their employer. Meanwhile, Medicare contributions are 1.45% of all wages, with workers and employers paying the same percentage into the system. Self-employed people pay the entire amount (12.40%) on their own.
In 2025, the point where Social Security contributions stop for BOTH employee and employer is $176,100. Many people believe that this ceiling should be eliminated and that ALL earnings should be subject to Social Security withholding - with perhaps a reduction in the withholding rate.
Medicare, on the other hand, has no income ceiling and applies to ALL wages. Self-employed individuals pay the full amount (2.9%) on their own. An additional Medicare tax (0.9%) kicks in at income thresholds above $200,000 for single filers and $250,000 for joint filers.
The Federal government and many states tax Social Security benefits as if they were earned income and on the Federal side, any “other” income above $62,160 results in a $1.00 reduction in Social Security benefits for each $3.00 in earnings above that limit.
Why am I giving all of that information? Because Social Security benefits, especially for retirees, are not handouts. The benefits are EARNED by working and paying into the system. Social Security has been around since the FDR administration and was intended to be a “safety net” for people in their old age. In 1940, however, the overall life expectancy was 62.9 years (men 60.8; women 65.2) — meaning that many workers (and especially those in industrial occupations) died before even becoming eligible for benefits. It wasn’t until approximately 1949 that a man’s life expectancy exceeded 65 years (65.2) and a woman’s life expectancy passed 70 (70.7 years).
By 1979, male life expectancy was 70 years, with women at 77.8. By 2004, men were up to 75 and women at 80.1.
Meanwhile, the population of the United States in 1940 was 132,164,569 and in 2020 (the last census year) was 331,449,281. That’s a whopping 250% increase in population in just 80 years…
The labor force has increased significantly since World War II. BUT… on the other end, life expectancy has increased as well - largely because of improvements in overall health. Meanwhile, women make up not quite 50% of the workforce - and are now entitled to Social Security payouts at retirement independent of their husbands’ benefits. Up until the late 1960s, most married women remained at home to care for their families and were thus not eligible for Social Security payments except as an offshoot of their husband’s benefits.
What I am trying to convey here is that most working Americans pay into the system with every paycheck; it is not the government’s to do with as they please. Rather, it is a deposit for our own futures, should we be lucky enough (and we should be!) to make it to retirement age.