Class Notes (836,849)
United States (324,787)
Economics (157)
ECON 0110 (84)
Lecture

Section 11 Notes.doc

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Department
Economics
Course
ECON 0110
Professor
K E N K E L
Semester
Spring

Description
SECTION 11: SOCIAL SECURITY SOCIAL SECURITY SYSTEM EMPLOYER PAYS 6.2% OF WAGES AND SALARY INTO SS FUND EMPLOYEE PAYS 6.2% OF WAGE AND SALARY EARNINGS TO SS FUND TOTAL = 12.4% OF WAGES AND SALARIES UP TO MAX EARNINGS OF $90,000 IF SELF EMPLOYED, WORKER PAYS ENTIRE 12.4% OF PROFITS During 2011, the employee will pay 4.2%, rather than 6.2% THE SOCIAL SECURITY TAX FREQUENTLY IS CALLED THE PAYROLL TAX because the tax is paid on wages, salaries, sole proprietor profits and partnership profits SOCIAL SECURITY TAXES ARE NOT PAID ON INTEREST INCOME, DIVIDENDS, CAPITAL GAINS, ROYALTIES THERE ARE NO DEDUCTIONS OR PERSONAL EXEMPTIONS Thus, unlike with Federal income taxes, you pay social security taxes on your very first dollar of wage earnings THE SOCIAL SECURITY TAX TAKES SAME PROPORTION OF INCOME FROM ALL WORKERS (UO TO THE EARNINGS CEILING OF $106,800) 6.2% IF EMPLOYEE, 12.4% IF SELF EMPLOYED THIS IS AN EXAMPLE OF A FLAT TAX TAX RATE IS THE SAME FOR ALL WORKERS (AS LONG AS INCOME DOES NOT EXCEED $106,800) SOCIAL SECURITY BENEFITS RETIREES CAN BEGIN RECEIVING REDUCED BENEFITS AT AGE 62 OR RETIREES CAN BEGIN RECEIVING UNREDUCED BENEFITS AT AGE 66 (AGE 67 IF BORN AFTER 1960) CURRENT CONTRIBUTIONS INTO THE FUND ARE USED TO PAY BENEFITS TO CURRENT RETIREES CURRENTLY THERE ARE ABOUT THREE WORKERS FOR EVERY RETIREE DURING MOST YEARS, THERE ARE MORE CONTRIBUTIONS INTO THE FUND THAN BENEFITS BEING PAID OUT OF THE FUND SOCIAL SECURITY SURPLUS ALL THE PAST SURPLUS SOCIAL SECURITY CONTRIBUTIONS HAVE BEEN SPENT BY THE FEDERAL GOVERNMENT TO PAY FOR OTHER GOVERNMENT EXPENSES EARLY RETIREMENT BEGINS AT AGE 62 THE “BABY BOOMER” GENERATION BEGINS WITH PEOPLE BORN IN 1946 (AFTER WWII) THE FIRST “BABY BOOMERS” BECAME 62 IN 2008 AFTER 2008, THE NUMBER OF RETIREES WILL EXPAND RAPIDLY AND BENEFITS BEING PAID WILL INCREASE RAPIDLY SUPPOSEDLY, AROUND 2018, BENEFITS BEING PAID OUT OF THE SOCIAL SECURITY FUND WILL BEGIN TO EXCEED CONTRIBUTIONS INTO THE FUND THUS, THE ANNUAL SOCIAL SECURITY SURPLUS WILL DISAPPEAR SUPPOSE THAT EVENTUALLY THE ANNUAL SOCIAL SECURITY CONTRIBUTIONS INTO THE FUND AMOUNT TO ONLY 85% OF ANNUAL SOCIAL SECURITY BENEFITS THAT NEED TO BE PAID OUT THE FEDERAL GOVERNMENT WILL NEED TO FIND NEW WAYS TO FINANCE THE ADDITIONAL 15% OF SOCIAL SECURITY BENEFITS BASED ON CURRENT BIRTH RATES AND FUTURE RETIREMENT RATES, IT IS PROJECTED THAT EVENTUALLY THERE WILL
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