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5.4 Social Security & Payroll Taxes

5.4 Social Security & Payroll Taxes
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  • Math Help

    In Example 3, you can calculate the amount contributed to Social Security using a spreadsheet as shown.

    The calculations show the value of the employee contributions to the Social Security system assuming all payments had earned 4% interest each year. Including the matching contributions from the employer, the total value would be , or about $140,000.

  • Consumer Suggestion

    In recent years there have been many advocates who claim that privatizing Social Security would allow individuals to make investments that would lead to higher retirement funds than Social Security pays out. What do you think? Should social security stay the same or should it be privatized? Check out ProCon.org to learn more about the issue for privatization of Social Security and see some pros and cons of both sides of the debate.

  • Checkpoint Solution

    Sample answer:

    Overall, I think that privatization of Social Security would be worse off for most workers. The system would change from a defined benefit plan to a defined contribution plan with no guarantees. Some workers might get lucky and hit the stock market lottery, but we shouldn't put most people's retirement at the whim of the stock market. Congress needs to stop raiding the Social Security trust fund and start looking for ways to strengthen the current system.

  • Comments (2)

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    system user
    Guest   6 years ago |
    have you looked at the social security disability program? it might be insolvent in just a few years

    http://news.yahoo.com/social-security-disability-verge-insolvency-090119318.html
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    system user
    Ron Larson (author)6 years ago |
    This example shocked me. I started writing the example thinking that Social Security was not a particularly good paying system. I was surprised to discover that, compared to what people pay in, the amount they take out isn't bad. I suppose that is the reason that the Social Security system is in trouble. Simply put, it pays out more than it takes in.
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