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USA Today
7 hours ago
- Business
- USA Today
Could you invest your own FICA taxes? The new Social Security proposal explained
As Elon Musk took a figurative chainsaw to the Social Security Administration earlier this year, there were those, like U.S. Rep. John B. Larson (D-Connecticut), who suspect the move had a lot to do with a desire to privatize Social Security. Social Security privatization refers to transforming the current Social Security system, primarily a government-run program, into a system that allows Americans to invest their Social Security contributions into private accounts rather than paying into the federal program. The challenge If you've ever looked at a paycheck and wondered what FICA stands for, it's the Federal Insurance Contributions Act. Of your gross wages, 6.2% goes into FICA to pay for Social Security and another 1.45% goes toward covering Medicare. Your employer matches both amounts, resulting in a total contribution of 15.3% of your wages. Contributions made today support benefits for retirees, people with disabilities, and survivors of workers who have died. Think of it as today's employees helping fund the benefits of today's retirees. Since Social Security was first established in 1935, the understanding has been that each generation of retirees will be supported by younger workers still on the job. A perfect storm of demographic changes in the United States put the Social Security system in a vulnerable position. Between the declining fertility rate and increased life expectancies, there are fewer workers to support an ever-growing group of retirees. As of this year, 12% of the total population is 65 or older. By 2080, it will be 23%. In other words, the worker-to-beneficiary ratio is expected to drop dramatically, potentially impacting the SSA's ability to fulfill promised benefit payments. A move away from FICA? Among the proposals being made is the suggestion that Americans retain the 6.2% of their wages currently allocated toward FICA. Instead, they can invest it in private investment vehicles and decide how the money should be allocated. Supporters of Social Security privatization argue that the change would give individuals greater control over their retirement savings and potentially allow them to earn returns higher than those provided by the current system's fixed benefits. They also see it as a way to reduce the financial burden on the federal government. On the other side are those who worry that some Americans may not have the financial literacy or resources to manage investments on their own. Not everyone has experience managing assets, and it's concerning to think about throwing millions of people into the investment pool who may never have learned to manage their finances effectively. Another concern involves what happens to those who spend years investing for retirement only to hit a string of bad luck. That may mean making bad investment choices or even facing losses due to uncontrollable setbacks, like a recession or bear market. Opponents worry about what will happen to those who hit retirement age with little money put away through no fault of their own, and point out that the current Social Security system offers fixed benefits that retirees can count on. Countless issues to work through Even if Congress were able to come to a consensus and privatize Social Security, there are thorny issues that would need to be managed. For example: Partial privatization? Some supporters of Social Security privatization suggest allowing workers to invest a portion of their current Social Security contributions in private accounts, with the remainder allocated to the traditional pay-as-you-go system. While this model would lower the Social Security benefits earned by workers who choose this path, they would have a safety net of some sort to look forward to in retirement. Given how difficult it can be to get Congress to agree on anything, there's no doubt that deciding to upend the entire Social Security system will be an uphill (and long-fought) battle. In the meantime, the more immediate goal is to find a way to shore up the current system so that retirees will receive every dollar they've been promised. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
Yahoo
27-05-2025
- Business
- Yahoo
Connecticut lawmakers applaud Pratt & Whitney contract agreement
CONNECTICUT (WTNH) — State lawmakers commend Pratt & Whitney union members' new contract agreement Tuesday following a nearly month-long strike with the company. The agreement was confirmed by a spokesperson with Pratt & Whitney, who said Connecticut IAM employees voted to ratify a revised new contract offer, marking the end of the strike. Pratt & Whitney union members approve new contract, strike concludes Congresswoman Rosa DeLauro (D-Conn.) showed her support for the resolution in a written statement. 'I am glad IAM Locals 1746 and 700 and Pratt & Whitney reached a resolution. When workers fight together, their unions can achieve outcomes that reflect their true value. These highly skilled workers fuel our state economy and contribute to our national defense, and this new agreement means all parties can move forward with renewed stability. I will always stand with workers fighting for fairer wages and strong benefits.' For weeks, union members endured rain, cold and long nights as they negotiated a new contract. The previous one expired on May 4, when strikes began. 'Connecticut's skilled machinists have a long history of making the most advanced and reliable engines in the world at Pratt & Whitney, right here in East Hartford and Middletown,' State Rep. John B. Larson (D-Conn.) said. 'I am glad to see an agreement for better wages and benefits that honors their work, as well as a firm commitment from RTX to grow its workforce in Connecticut. I applaud the 3,000 machinists who courageously stood up for the dignity of work during this strike and congratulate IAM leadership and RTX on successful negotiations for a new contract agreement.' Striking points in the negotiations included higher wages and pensions for younger workers. Sen. Stephen Harding (R-Conn.) said this shows how unaffordable the state can be for employers and their employees. 'Pratt & Whitney and its workers are part of the backbone of Connecticut's economy. This strike showed how unaffordable Connecticut is for both job creators and their employees. Gov. Lamont: Senate Democrat leadership's priority legislation is to give taxpayer-funded unemployment benefits to striking workers. A veto threat from you would be very helpful, because that anti-business bill essentially tells companies to not do business in Connecticut. These strikes will continue to happen in the future unless and until we turn Connecticut's anti-job creator policies around. Republicans at the State Capitol continue fighting to lower energy costs, lower taxes, defend our government spending caps, and eliminate waste, fraud and abuse in state government.' Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
USA Today
16-04-2025
- Business
- USA Today
Do billionaires still collect Social Security? The answer might surprise you
Do billionaires still collect Social Security? The answer might surprise you Show Caption Hide Caption Best colleges to attend if you want to be a billionaire A quarter of the 813 American citizens on Forbes' billionaire's list got their undergraduate degrees from one of just a dozen colleges. unbranded - Lifestyle As long as they have a qualifying work history, billionaires collect Social Security benefits like everyone else. But not precisely like everyone else. The average American on Social Security in 2025 receives $1,976 per month. Presuming a billionaire's income is from earned wages, it's likely that they'll receive something close to $5,108, the maximum Social Security monthly benefit available. Work history matters Let's say the billionaire inherited their wealth, doesn't own a business, and has not worked long enough to earn the 40 credits necessary to be eligible for Social Security benefits. If their billionaire status is thanks to inheritance, interest earnings, investment gains, and dividends, they would not qualify for Social Security benefits. To be entitled to retirement benefits, a person must have paid into the system through payroll taxes. Americans must pay Social Security taxes on the first $176,100 earned in 2025. That means once a billionaire has scored their first $176,100, they're done paying Social Security taxes for the year, the same as other high-income individuals. If they pay those maximum taxes for 35 years, it puts them in line to receive something close to the highest possible monthly benefit in retirement. Paying Social Security taxes is easier for s ome Whether they aim to retire early or plan to work to 70, most (163 million) Americans pay Social Security taxes all year. For some of the remaining 6%, Social Security taxes are paid in a few months. And for a few, they're paid much faster. But for many billionaires in the business world, it's hard to pin down exactly how much they receive in compensation that's subject to Social Security payroll tax under current law. Figures from Rep. John B. Larson (D-Ct.) suggest that Elon Musk's Social Security taxes would take approximately 15 minutes to pay if you looked through any formal salary figure to incorporate Tesla's earnings. If all of Musk's income were taxed, he would have paid all his Social Security taxes in somewhere between 30 and 60 seconds, with the Los Angeles Times also weighing in. Again, based on public data and certain definitions of income that are more inclusive than the wages currently subject to tax, others would pay their Social Security taxes in less time than it takes some folks to eat breakfast. Here's more of what Rep. Larson's office found: Palantir CEO Alexander Karp would take approximately 19 minutes to get his Social Security taxes squared away. Hock Tan, CEO of Broadcom, would likely finish paying Social Security taxes in about 30 minutes. Also finishing in approximately 30 minutes would be Brian Armstrong, CEO of Coinbase. The Los Angeles Times added two more rough estimates to the list: McDonald's CEO Christopher Kempczinski could have all his Social Security taxes paid by Jan. 3 . Apple Chief Executive Tim Cook could rest easy around 2 p.m. on New Year's Day, knowing his Social Security taxes would have been done and dusted for the year. The silver lining While paying their annual Social Security taxes in minutes or hours is undoubtedly good news for the wealthy individuals mentioned above, it may ultimately be good news for the American public. According to the Social Security Trustees, eliminating the tax cap could raise around $3.2 trillion over 10 years. While that's not enough to make Social Security 100% whole, it would cover 53% of the 75-year funding gap. Eliminating the income cap and including more types of income into the payroll tax base are just two of many Social Security solutions floating around Washington. Who knows? Combining it with other practical ideas may be how Congress unifies long enough to secure Social Security for future generations. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $ 22,924 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies. View the "Social Security secrets" »
