Infatuation Rules
Photo by cottonbro studio Pexels Logo Photo: cottonbro studio

What do millionaires get for Social Security?

In the eyes of the IRS, investment income, such as dividends from stocks and interest from bonds, doesn't count as “earned income.” As many millionaires and billionaires inherited their wealth and live off investment income, this means they don't pay Social Security taxes and are thus ineligible for retirement benefits ...

finance.yahoo.com - Can Millionaires and Billionaires Collect Social Security?
Can you be happily married to a narcissist?
Can you be happily married to a narcissist?

According to a blog post on Psychology Today by Elinor Greenberg Ph. D.; however, you can almost never be actually happy in a relationship with...

Read More »
Last updated Sep 13, 2021
What do black nails mean on a girl?
What do black nails mean on a girl?

Black nail polish can symbolize different things. It represents confidence, it is mysterious and daring. People may also see it as an expression of...

Read More »
Last updated Sep 21, 2019

Although to some degree it might seem as if billionaires and millionaires in the U.S. shouldn’t be collecting Social Security, the truth is there is no law against it, and mathematically it makes sense. Social Security isn’t simply a welfare program, with money handed out to anyone who asks. Rather, Social Security is funded by payroll taxes on workers.

Learn: 15 Worst States To Live on Just a Social Security Check

As millionaires and billionaires by definition earn more money than most Americans throughout their careers, they also pay a higher amount of tax into the program. Just because they may not be “in need” when they retire doesn’t mean that they haven’t funded the program along the way, more so even than most Americans. Here’s a quick look at how Social Security actually works, along with a discussion of how millionaires and billionaires do benefit more than some Americans from the structure of the program.

How Is Social Security Funded?

Social Security is funded by payroll taxes on workers. Current workers pay into the system now for the benefit of retirees, and when those workers retire themselves, their retirement will be funded by the next generation of taxpayers. When needed, additional money is paid into the system from the Social Security Trust Fund, which consists of excess contributions from prior years. One of the problems with Social Security as it is currently structured is that the Social Security Trust Fund is rapidly becoming depleted, and it may be insolvent in 2033 based on current projections. But retirees will still get payments from taxes paid into the system from current workers.

Take Our Poll: Do You Tip for Service?

What Is the Social Security Tax Rate?

Current workers pay a tax of 6.2% in Old-Age, Survivors and Disability Insurance taxes, along with 1.45% in Medicare taxes. Combined, workers pay 7.65% of their income into Social Security. Employers pay a matching 7.65% tax on behalf of their workers. As self-employed workers are both employers and employees, they have to pay both sides of the tax, amounting to a total of 15.3%.

Story continues

How Do Wealthy Americans Benefit From the Structure of Social Security Taxes?

Although all workers with earned income pay 6.2% in OASDI taxes, there is an income level above which that tax vanishes. For 2022, this Social Security wage base is $147,000. This means that if you earn more than this amount in 2022, you won’t have to pay that tax on your excess earnings. This can be a huge benefit for millionaires and billionaires, as they end up being taxed on only a small portion of their earnings. By contrast, most Americans end up paying OASDI and Medicare taxes on 100% of their earnings.

What Are the Average and Maximum Social Security Benefits?

What is true individuality?
What is true individuality?

True individualism is a social theory that says that individuals cannot be properly understood without understanding the social processes that...

Read More »
Last updated Jan 10, 2018
Does cuddling make a man fall in love?
Does cuddling make a man fall in love?

When it comes to how people feel about cuddling, you may wonder whether or not cuddling can make a person fall in love. In short, no, cuddling...

Read More »
Last updated Dec 25, 2019

For 2022, the average Social Security retirement benefit is $1,657. However, the maximum possible benefit is $4,194. To earn this benefit, you’d have to wait to file for Social Security until age 70, and you’d have to earn at least as much as the Social Security wage base for 35 years. In other words, most Americans draw nowhere near the Social Security maximum. This maximum payout helps level the playing field when it comes to millionaires and billionaires. While high earners can avoid Social Security taxes on their earnings above the wage base, their maximum payout is similarly capped. This is because the Social Security retirement formula doesn’t account for earnings above the wage base. Whether you earn $147,000 or $147 million in 2022, your Social Security taxes — and the credit you’ll get toward your future retirement benefit — will be the same.

When Might a Millionaire or Billionaire Not Be Eligible for Social Security Benefits?

Just because you reach retirement age doesn’t mean you qualify for Social Security benefits. Technically, you need 40 “quarters of coverage” to earn Social Security benefits, which for most workers means 10 years or more of paying Social Security taxes. But Social Security taxes only apply to earned income. In the eyes of the IRS, investment income, such as dividends from stocks and interest from bonds, doesn’t count as “earned income.” As many millionaires and billionaires inherited their wealth and live off investment income, this means they don’t pay Social Security taxes and are thus ineligible for retirement benefits unless they work and pay taxes that way.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Can Millionaires and Billionaires Collect Social Security?

finance.yahoo.com - Can Millionaires and Billionaires Collect Social Security?
What is a sadistic narcissist?
What is a sadistic narcissist?

The emotionally sadistic narcissist derives enjoyment from hurting someone. More than physical abuse, they are experts at manipulating people's...

Read More »
Last updated Jul 19, 2021
What makes you happy in a relationship?
What makes you happy in a relationship?

According to experts, the foundation of being happy in a relationship is built on communication and trust. Relationship experts agree there are...

Read More »
Last updated May 28, 2021
What happens when a guy is in love?
What happens when a guy is in love?

When he's falling in love, everything is likely to become about her. He can't stop thinking about her and would rather be spending time with her...

Read More »
Last updated Apr 7, 2019
What kills feelings in a relationship?
What kills feelings in a relationship?

Lack of Trust Jealousy. Snooping. Blaming. Questioning their relationships with other people. Oct 4, 2018

Read More »
Last updated Nov 10, 2022