Want an Extra 3.1% to Save for Your Retirement Each Month? [Personal Social Security Account]

Personal Social Security AccountIf you had to tell me right now how much you pay into Social Security each month could you do it? Many people can’t. If you are employed, you are paying 4.2% (temporarily down from 6.2%) of your income into Social Security.

Did you know your employer is also paying money into your Social Security on your behalf? They are currently paying 6.2% of your income into the system. That makes a total of 10.4% of your pay going towards social security.

If you make $4,000 a month at your job, then you and your employer are contributing $416 a month to your social security. That’s a pretty decent size chunk, right?

Low Expectations for the Status Quo

Here’s the question that creates a contrast: what do you expect to get from social security by the time you retire? I’d be willing to bet that many of you don’t factor in social security when it comes to your own retirement planning. I don’t.

Let’s go to Facebook…

  1. Do you think Social Security will be around when you retire?
  2. If so, do you factor in social security when doing your retirement planning?
Social Security Facebook Comments

Social Security as a factor in retirement planning.

As an aside, if you were required to pay that 4.2% each month by check do you think you’d think differently about Social Security? I think our current payroll tax system helps to disguise what’s going on.

So what’s wrong with Social Security? I think U.S. Senator Marco Rubio said it best when he said,

“When Social Security first started, there was 16 workers for every retiree. Today there are three workers for every retiree and soon there will be only two for every retiree.”

There’s your major problem. Too many people need their promised benefits and not enough people are paying into the system. Now you see why people joke that it’s a ponzi scheme.

The Personal Social Security Account

So how do we fix Social Security? Newt Gingrich has risin to the top of the group of Republicans vying for the Presidency. If Gingrich stays on top for long you’ll begin hearing a lot more about his proposed plan to fix Social Security, at least for young people.

Gingrich basically wants young people to have a choice to take a portion (he previously stated half or 3.1%) of their contribution to Social Security and put it into a private savings account.

Gingrich’s plan is at least partially based on a model that has worked. Galveston (TX) County employees opted out of the Social Security system back in the 70s. They formed their own retirement savings plan and, while not perfect, it has outperformed Social Security in many ways.

I like this idea because it’s not a full-on privatization of social security, and thus would stand a better chance of getting support from both political parties. I also like it because it brings transparency and more personal responsibility into the Social Security system. Lastly, I like it because it partially removes the Government out of the place of power when it comes to my own retirement money.

What about you? Want an extra 3.1% to save for your retirement each month?

Image by DonkeyHotey

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Last Edited: July 22, 2014 @ 12:29 am
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. Philip Taylor says:

    @Jon Great job using one Economist’s opinion from the left-leaning attack dog newspaper, the NYT. You’re just presenting partisan opinions. Not facts. Both sides can give quotes: Art Laffer support Gingrich’s plan. The Galveston plan is proven. It’s a 100% fact that the Galveston plan has kicked Social Securities ars ten times over. The current SS plan is a failure and no one my age wants it. People want a better solution. We’re not just taking care of the disabled and the poor. We’re taking care of everyone. Everyone gets a check. You bringing the social issue into play here is just fear-mongering.

  2. Philip Taylor says:

    @Jon Your comments just go on and on, geesh. Here’s a conclusion…you’re just here to support liberal/socialist and trying to discredit the top GOP candidate. I’m sick of it. I have to listen to it on every channel on TV and see it in every major newspaper across the country. I’m done with it and I won’t allow it on my blog. Please just stop.