Social Security

Social Security refers to a set of benefit programs established and run by the federal government. The Social Security program is commonly identified with old age or retirement benefits and with disability benefits. The program was created in 1935 as part of Franklin Roosevelt’s New Deal initiative. Medicare and Medicaid are also social insurance programs established and administered by the federal government, but they are separate from Social Security. Social Security is a “pay-as-you-go” entitlement program. This means that current tax revenue is used to support current beneficiaries. In other words, there are no assets set aside to fund future benefit payments. When combined with demographic trends (i.e. an aging society), the pay-as-you-go funding approach is a feature that brings into question the sustainability of Social Security. Currently, Social Security is funded largely through payroll or “FICA” taxes which are a blend of employee and employer contributions that come from taxes on the wages of workers and the self-employed. Whether you’re employed or are self-employed, Social Security taxes amount to 10.4% of earnings, with the applicable earnings capped by a ceiling that is adjusted every year. The earliest age to get retirement benefits is 62, but the longer you wait, the higher the benefits. The average Social Security benefit in January 2012 is $1,229 per month. Social Security benefits are inflation-adjusted with increases pegged to the consumer price index (CPI). Social Security is the sole source of retirement income for 22 percent of beneficiaries, and the program is the majority (greater than 50 percent) source of retirement income for 66 percent of beneficiaries.

An Interview with Retirement Planning Expert Henry Hebeler

 

Henry "Bud" Hebeler is a former Boeing executive who has been running a retirement planning...

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Money Magazine on Immediate Annuities

There is a good article on the use of immediate annuities by Walter Updegrave who is a senior editor at Money Magazine. The article discusses how to think about an immediate annuity in light of other guaranteed payments from Social Security or a pension plan . Laddering of annuity purchases is discussed. Age and timing of an annuity purchase is addressed, as is the concept of the mortality yield or mortality credit . Source: Money Magazine Full Story

An Interview with Wharton Professor David Babbel - Part One

This is the first part of an interview with Wharton Professor David Babbel.

Professor Babbel led the...

When to Start Taking Social Security

The New York Times has recently run a series of articles that discuss various aspects of Social Security. One of the most prominent and frequently asked questions among readers involves when to start receiving Social Security benefits. There decision is complex and there are many trade-offs. The Times article referenced below is a great resource for anyone wrestling with decisions related to Social Security. Source: New York Times Full Story
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The Wall Street Journal's Brett Arends on Annuities

Brett Arends writes a personal finance column for the Wall Street Journal. He is one of the more interesting and popular personal finance writers in the industry. Although a subscription is required to read the Wall Street Journal, Arends' column (among other Journal features) is highly recommended. For the past two weeks, Arends has written columns that focus on annuities. The columns can be accessed by clicking here and here . Both articles are highly recommended. Topics addressed include:...

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