Renowned investor Warren Buffett let out a surprised (and perhaps unwanted) exclamation at the third Republican presidential primary debate in Miami.
Former New Jersey Gov. Chris Christie took aim at the “wealthy” and said “Social Security shouldn't be collected” when he shared his two cents on how to fix the nation's strained Social Security program. Stated.
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That's when he approached the 93-year-old billionaire and CEO of Berkshire Hathaway (BRK-A).
“I don't know if Warren Buffett collects Social Security, but if he does, shame on him,” Christie said. “You shouldn't take the money.”
Mr. Christie foretold the doom of Social Security in a press conference earlier this year, predicting that Social Security, along with Medicare, would be “bankrupt” in 11 years.
To “address this problem,” Republican presidential candidates are advocating raising the retirement age for young workers and controlling eligibility for Social Security benefits. He ruled out raising taxes to fund the program.
He called on American voters to remember why Social Security was created “as a safety net to ensure that no one in this country grows old in poverty.”
Is Christie right to criticize millionaires and billionaires who may be collecting retirement funds? Here's how the Social Security program actually works and how it's funded.
How is Social Security funded?
Social Security is funded by a dedicated payroll tax (6.2% of wages within certain limits) paid by both employers and employees.
The SSA sets limits on the amount of earnings that are taxable each year. This limit (called the contribution and benefit threshold, or tax cap) changes annually according to the national average wage index.
The maximum tax liability for 2023 would be $160,200, and the resulting maximum Social Security tax would be $9,932.40. Next year, the wage threshold will rise to $168,600 and the Social Security tax cap will rise to $10,453, still a small amount for billionaires.
Medicare taxes are also deducted from your monthly paycheck at a rate of 1.45% to pay for Medicare Part A, which provides hospital insurance for the elderly and disabled. Unlike Social Security taxes, Medicare taxes have no wage cap. However, if in a calendar year he earns more than $200,000, the employer must withhold an additional 0.9%.
If you earn more than the Social Security tax limit in a year, whether from one job or multiple jobs, you're only taxed up to that threshold. So whether you make $170,000 or $1.7 million, the maximum amount you pay into the system is the same.
This is because most Americans pay taxes on 100% of their income, whereas they end up paying Social Security taxes on only a small portion of their income. It is very beneficial for the most wealthy individuals.
This is interesting in the case of Buffett, who has made a relatively modest annual salary of $100,000 for the past 40 years. So, technically, he has been below Social Security's wage base limit since 2008. However, Buffett, the co-founder of Berkshire Hathaway, has been receiving additional income from director fees and security fees for many years, which exceeds the standard.
You may be wondering, what happens to the rest of Buffett's vast wealth? Most of his income comes from capital gains on his investment portfolio, but this is not considered income for Social Security purposes.
Average benefit payments (and how to maximize benefits)
If you're 62 or older, worked for more than 10 years and paid Social Security taxes, you're eligible for retirement benefits, whether you're a millionaire or living paycheck to paycheck.
According to SSA data, there were approximately 67 million Social Security claimants as of September 2023, receiving an average monthly benefit of $1,706. This equates to $20,472 per applicant per year. This makes much more sense for people on low incomes than it does for people earning high six-figure salaries.
By 2024, more than 71 million Americans will receive this benefit. Additionally, Social Security retirement benefits will increase by an average of $50 per month starting in January.
The earliest Americans can start claiming Social Security is age 62. However, those who choose to defer until they reach full retirement age of 66 to 67 (depending on year of birth) will have higher monthly payments, providing maximum benefits to those who wait. That will happen. Claim to be over 70 years old.
In addition to changes to the Social Security program, Mr. Christie has repeatedly advocated for raising the retirement age during his campaign.
“If we want this system to survive, we need to raise the retirement age,” he said recently. tweeted.
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Those who reach full retirement age of 67 in 2023 can receive benefits of up to $3,627 per month. But if she starts claiming this year at age 62, her maximum monthly payment will be $2,572, a 29% reduction. If you waited until age 70 to start collecting benefits, you could have claimed up to $4,555 per month, which is about $2,000 more per month than someone claiming at age 62.
Social Security benefits are projected to increase in 2024, with workers retiring at full retirement age receiving $3,822 per month. However, if he decides to retire early at age 62 in 2024, the maximum monthly benefit he will receive will be $2,710, and if he waits to claim at age 70 he will receive a check of up to $4,873 per month. It will be.
The math speaks for itself. The longer you delay claiming Social Security, the larger your monthly benefit will be. However, while wealthy Americans can wait until age 70 to claim maximum benefits, many feel the need to claim early (despite financial penalties) to help make ends meet. I feel that.
Compress Social Security numbers
Simply put, Social Security costs a lot of money. It's the largest category of federal spending, along with health care, and has received a lot of intense attention amid the nation's $33 trillion debt crisis.
The program's deficit is projected to increase further as more baby boomers retire and the pool of Social Security recipients swells. The number of Americans who fall into that age and retirement bracket is projected to increase from about 58 million in 2022 to about 75 million by 2035.
Both Christie and fellow Republican candidate Nikki Haley argued that the federal government cannot continue to meet the bill for older people who are living longer and longer lives. They proposed raising the retirement age for younger workers without reducing the current eligibility of older workers, but declined to specify a specific age, saying it would depend on negotiations with Congress.
“Any candidate who says they're not going to assume the rights is not serious,” said Haley, a former U.S. ambassador to the United Nations. “Social Security will be bankrupt within 10 years and Medicare will be bankrupt within eight years.”
In addition to raising the retirement age for younger workers, Haley wants to “limit benefits to the wealthy” and expand Medicare Advantage plans because “older people like it.” There is. She added: “That's how we approach entitlement reform, that's how we reduce debt.”
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.
