Warren Buffett has said a lot about investing through the
years. But it turns out he's more than happy to share his
thoughts on Social Security as well. And it just so happens to be
one issue both he and President Obama undoubtedly agree on.
The surprising reality
In 2011 Barack Obama was asked about the future of Social
Security by a woman who suspected she'd be working another 25
years and had the worry that "I don't know if it will be there
when I need it, and I'm concerned about that."
While Obama asserted "Social Security will definitely be there
when you retire," to ease any concern, he said there are
undoubtedly questions about its future, and change must be made
regarding it. He went on to say:
I'll just give you one example of a change that would make a
difference in Social Security. Right now you only pay a Social
Security tax up to a certain point of your income. So a little
bit over $100,000, your Social Security -- you don't pay Social
Now, how many people are making less than $100,000 a year?
Don't be bashful. The point is, for the vast majority of
Americans, every dime you earn, you're paying some in Social
Security. But for Warren Buffett, he stops paying at a little
bit over $100,000 and then the next $50 billion he's not paying
a dime in Social Security taxes.
It's a somewhat startling assertion. But that's the reality of
social security taxes.
In 2013 the maximum amount of earnings social security taxes
were collected on stood at $113,700. And as you can see in
the chart below, 90% of Americans fell below this line, and yet
they represented just 50% of the income which was earned:
The honest remarks
So what does one of those who find themselves in the top 1% think
about the issue? Consider Buffett's
from a 2011 op-ed in the New York Times entitled
Stop Coddling the Super-Rich
Last year my federal tax bill - the income tax I paid, as
well as payroll taxes paid by me and on my behalf - was
$6,938,744. That sounds like a lot of money. But what I paid
was only 17.4 percent of my taxable income - and that's
actually a lower percentage than was paid by any of the other
20 people in our office. Their tax burdens ranged from 33
percent to 41 percent and averaged 36 percent.
He went on to note that in 1992 the 400 richest individuals in
America had a tax rate of 29.2%, but by 2008 that number had
dipped to 21.5%. And he himself suggested if he were in control
he'd "leave rates for 99.7 percent of taxpayers unchanged," but
raise rates for those making $1 million or more.
As the White House would say, this is now known simply as "The
Buffett Rule: A Basic Principle of Tax Fairness."
But as he noted in his 2005 annual meeting, he believe Social
Security also needed to be reformed.
He said at the time that the cut-off needed to be raised or
eliminated altogether, and that perhaps the government should
consider raising the retirement age, which it last did in
Charlie Munger, the second in command at Buffett's
, was even more blunt, saying:
That's the perspective of the Democrat up here, so you might
be surprised to hear from the Republican that I think the
Republicans are out of their cotton-pickin' minds to be taking
on this issue at this time. The thought that more of our GDP
will be going to the elderly over time is not [an abomination]
to me. Social Security is very successful. Apart from
disability - a small part - there's almost no fraud...it
rewards work, it's low cost. It's one of the most successful
government programs ever.
Obama concluded his remarks in 2011 by adding:
So if we just made a little bit of an adjustment in terms of
the cap on Social Security, that would do a significant amount
to stabilize the system. And that's just an example of the
kinds of changes that we can make.
As Buffett and Munger note, no matter which side of the aisle
you find yourself on, one has to hope this is one thing all
Americans can agree needs to be changed.
How to get even more income during retirement
The reality is -- and undoubtedly Buffett would agree -- Social
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not the only way to boost your retirement income. In our
brand-new free report, our retirement experts give their
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Social Security: What Barack Obama and Warren
Buffett Want You to Know
originally appeared on Fool.com.
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