11G1_SocialSecurtiy

11G1_SocialSecurtiy - Social Security Social Section in...

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Social Security Social Security Section in Zagorsky Chapter 4 “Population”
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Introduction What is Social Security? A federal government pension program financed by taxes on worker’s pay. Currently 15.3% of your pay (12.4% to pension program and 2.9% to retiree health program called Medicare) Half paid by employee Half paid by employer Tax applies only on income up to $106,800. This pension program is a defined benefit plan.
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Social Security Is Big 40 million people get checks each year from the retirement portion of the program. What percent of U.S. population is this? 75% of people getting checks are retired workers 25% of people are spouses, children of dead retirees These people were paid $450 billion in past year. Typical beneficiary got $1,000 per month.
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How Do You Get Benefits? Rules are complicated and lots of special cases. If you work 40 quarters during your lifetime you are covered by Social Security and will receive a pension when you retire Current earliest age to collect 62. If you wait till 67 you will get more $$. If you earn slightly more than $1,000 (before taxes) in any 3 month period (and it is reported to government) you are counted as having worked 1 quarter. Go to /www.ssa.gov/statement and get a list (via U.S. mail) of how many quarters you have worked and your wages.
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Why Is Social Security Important? U.S. is a country that focuses on spending not savings. In 2007 the Survey of Consumer Finances (premier U.S. wealth study) shows 44% percent of all families did not save in past year. Median net worth is $120,000, just 2.5 years of income. Median net worth of those retired is only $160,000, of which over half is the value of their home. What does this mean? That a large percentage of retirees have little savings/wealth on which to live after they finish working!
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2 Types of Pensions Defined Benefit Plans (DB) Single pool of money for all past and current workers at a company Defined Contribution Plans (DC) Each worker has a separate pool of money managed individually for that worker.
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Defined Benefit (DB) plan Company: If pool’s investments do well company does not need to contribute any money. If investments do poorly company owes extra money. Worker: Puts portion of salary into pool, no matter how
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11G1_SocialSecurtiy - Social Security Social Section in...

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