In all my years of being in practice, I have heard, from Washington that they will fix the Social Security System.
In theory, Social Security, and therefore our Social Security Number, is supposed to be an account for which we can take our money at retirement, and live happily ever after. That isn’t what is became. When the Baby Boomers were in their income earning years, there were seven people paying into Social Security for every one person collecting benefits.
Where did the excess monies go? They simply were used by the Federal Government, and were replaced with an IOU.
As the Baby Boomers age, there is currently three of Generation X, paying benefits for every one person receiving benefits. In fact, if you order your resonance Earnings Benefit Statement (PEBES) from the Social Security Administration, you are told in no uncertain terms that Social Security, in its current form will be exhausted by 2030.
Where does that leave my generation and everyone else? I have come to terms that I will never see Social Security Benefits in my lifetime.
My generation was told very early on to save for our retirement, so we did. However, I have to pay in 15.3 percent of my money (because I am self-employed), every time I pay myself. I am literally throwing this money away.
However, I have to do this, because the amounts that I put into my retirement account, are based on my earned income (I.e. money subject to FICA Taxes). The question is, what is the remedy?
Social Security Benefits, are not a popular topic on Capital Hill. Old people are literally bused to the polls, and any mention of changing the system, is political suicide.
One plan would be to allow a person to opt out of paying into this bankrupt system. At age 45, you should be able to elect out of paying Social Security, elect to take no benefits, and figure out retirement (if you haven’t already started), on your own.
Why should I be forced to pay into a system that tell you themselves, will be bankrupt? Allow me to make my own choice in what I do for retirement, without the Federal Government’s interference.
Then there is the push to eliminate the wage base where Social Security maxes out. Honestly, why should I have to suffer, because the Congress decided to use the surplus that was created?
We have already created a system where we have “reasonable compensation,” meaning S-Corporations can pay something less than what they should and make up for it with distributions. There is nothing wrong with that, but I spoke with an accountant one day that told me that she has a client that pays $100,000 in compensation, which she said was reasonable, and $300,000 in distributions. I have no idea how that is reasonable, but I won’t have to defend that before the IRS.
Exposing all of an S-Corporation’s salary and distributions to FICA, would negate the purpose for being an S-Corporation. Not to mention, in a C-Corporation, reasonable compensation is opposite. Too much in reasonable compensation is a no-no. So what is the answer?
Frankly, my thoughts are to let Social Security Trust Fund be exhausted. What do I care? I’ll never see it anyway.
Baby Boomers were told this as well. Most didn’t care. I have worked since I was 16, which is 30 years. I will never see all the money that I’ve paid into the system. I am willing to cut my losses and never have to pay that amount again and handle my own retirement.
I know I sound crass, but my generation was told all of this from the beginning. If we were told, so were the Boomers.
Will Social Security be solvent when I retire? I doubt it. I mean, how am I supposed to live on $1,000 a month anyway? It’s a joke and it’s about time we got rid of it.
About Craig W. Smalley, EA
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.