Lower-income individuals can count on Social Security replacing a fair amount of their pre-retirement salaries. However, it is still important to have other sources of savings and income beyond Social Security.
But it can’t be helped to rely on services such as Social Security for extra income.
According to a Commerce Department gauge, inflation rose strongly in October, accelerating at its fastest pace since the early 1990s.
Prices for personal consumption expenditures excluding food and energy increased 4.1% from a year ago, with the so-called core reading last higher in January 1991.
Workers who earn $30,000 per year pay payroll taxes on all of their income, because the wage base limit on Social Security taxes is almost four times that amount.
You’ll pay 6.2% of your salary, or $1,860. Your employer will pay the same amount to the federal government, because the law imposes an equal tax on employers as well.
For determining benefits, you’ll get full credit for your earnings as long as it was subject to payroll taxes.
This also applies to workers for all private employers and for the majority of government workers as well, with the exception of those relatively few state and local government entities that don’t participate in Social Security and have their own pension programs instead.
If you’ve earned $30,000 for several years going into the past, then your benefits will be larger than if you earned less in past years and enjoyed raises over the same time period.
If you keep earning $30,000 in the future, Social Security will pay you less than you’d get if you earned raises in future years.
Social Security replaces a substantial portion of lower-income individuals’ earnings.
Workers can get more than half of their working income replaced by Social Security. That compares to just over 40% for those making $60,000 and barely more than a quarter for those with earnings of $120,000 annually.
Those who retire after careers shorter than 35 years get an even higher percentage of their average income replaced.
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