You pay a lot of taxes for Social Security and Medicare while working, but afterwards, receive a lot of benefits. Do your advantages outweigh your taxes?
Unlike 401(k) contributions, your Social Security and Medicare taxes do not go into separate accounts.
That makes calculating whether you get more or less in benefits than you pay in taxes difficult. Also, you won’t know until after your death how much money you’ve received in benefits.
Most people guess, but the Urban Institute publishes a report now and then that analyses the numbers.
The report must employ estimates like average life expectancy and median lifetime income to create profiles and net effects estimates. Even so, it’s a good indicator of how the average person does.
The analysis estimated that lifetime Social Security and Medicare benefits would surpass lifetime taxes by $550,000 for a single male worker earning average wages and retiring in 2020 at age 65. For a married pair, the advantage is bigger if one of the spouses earns less than average. In total, the couple received $1.1 million more than taxes.
Higher-income beneficiaries receive less, but still a net gain.
The researchers expect that millennials retiring around 2060 will profit from the initiatives twice as much.
Other profiles and comparisons are included. It’s no surprise that lower- and middle-income people get more net benefits than higher-income people. Both programmes are means-tested to ensure lower-income people get more benefits per dollar than higher-income people.
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Overall, the analysis concludes that benefits outweigh taxes at all income levels.
You can debate the report’s particular net benefits.
There are no other taxes included in the report. It excludes income taxes collected to supplement Social Security or Medicare.
It also ignores whatever investment gains the taxpayer might have obtained instead of paying into the schemes.
That said, times are a-changin’ and likely Higher-income earners’ Social Security levies are beginning to exceed predicted lifetime benefits.
Benefits and taxes for Social Security and Medicare are due for modification. In the next years, Congress may have to raise taxes, reduce benefits, or do both.