Why does retirement have to be taxing for so many people?

The greed and gluttony of a very few has too many people scrambling for crumbs

Photo by Towfiqu barbhuiya on Unsplash

By Tim Wilson

I’ve just hit a milestone that has me getting mail about Medicare, senior discounts and products including Miracle Ear.

It also has me thinking about topics I’ve given little thought to in the past, such as Social Security. As a result, I’m experiencing that phenomenon of when something comes to your attention and suddenly seems to pop up everywhere. Of course, it’s been there all along. I just hadn’t noticed.

I have no delusions of relying on Social Security. And as far as retirement goes, partly by choice and partly out of financial necessity, I won’t be retiring until someone closes the lid on me.

What’s been bothering me, though, is the increased realization that many of my contemporaries approach this milestone with trepidation that their “golden years” will be tarnished financially.

Some would say those approaching retirement unprepared have only themselves to blame. I beg to differ.

Certainly, it’s been no secret that you would need a 401K or some type of retirement savings to supplement Social Security. Maybe they didn’t have an employer who offered that as an option. Even if they did, not everyone had the benefit of a matching contribution. Whether considering a company retirement savings program or saving on their own, some folks just didn’t have surplus funds to direct toward retirement.

When you’re choosing among paying housing costs, feeding and clothing your kids, college tuitions and assorted day-to-day living expenses, it can be hard to put something aside for yourself when you are responsible for your family. This is especially true if you are among the 54 percent of individual Americans who earned less than $50,000 in 2022, according to the IRS. Even if Mom and Dad were both pulling in $50,000, that’s not a lot of money these days.

Some would say they should just get second jobs or maybe they needed to study harder in school or make better career choices. They also might suggest that those lower earners simply keep working even if they’ve been doing back-breaking physical labor for 40-plus years and don’t have the experience to get a desk job in their 60s that pays the bills.

To those offering observations and advice like this I say, if you’ve got a silver spoon, stick it where the sun doesn’t shine.

It’s a disgrace in this country that two people willing to work hard at full-time jobs struggle to afford basic needs for their family while putting their future financial security in jeopardy. How the hell did we make all the technological advances in the past 75 years, but we went from the average family able to rely on a single income, to two incomes becoming not a choice but a requirement for most families?

We are not all blessed with the intellect or physical capabilities to hold down higher paying jobs. This is not about choice. It’s about ability and opportunity and that game doesn’t take place on a level playing field. The greed and gluttony of a very few has too many people scrambling for crumbs while those at the top step on them to get to their third, fourth of fifth pie, not just a piece of the pie.

I understand that being wealthy does not make somebody greedy or selfish. There are some wonderfully generous people in that top 1 percent and God bless them for that. If only more in the same financial circles saw them as role models.

Our economic system allows people in positions of power to not only tilt, but warp things in their favor. For example, according to a study by the Economic Policy Institute, in 2022 CEOs in the United States were paid 344 times as much as a typical worker in contrast to 1965 when they were paid 21 times as much as a typical worker. https://www.epi.org/publication/ceo-pay-in-2022/

Marie Antoinette would fit right in with this crowd.

Keep those numbers in mind when you consider that we pay the 6.2 percent Social Security tax only on the first $168,000 of income. That means if you make $168,000 or less you pay the Social Security tax on 100 percent of your income. But if you make $1 million, you’re paying on just 16.8 percent of your income. Somehow that doesn’t seem right. Maybe we should exempt the first $30,000 of income and extend the Social Security tax to at least $200,000.

No, I don’t know how that exactly affects the revenue generated and it may not be the best approach. But there has to be a better way to do this.

Now don’t start giving me that crap about how the wealthy contribute so much more of their income in income taxes. They should. How about we focus on what is left after taxes and then see who has it so rough?

According to a study by Equilar for the Associated Press, the median total compensation for S&P 500 CEOs was $14.8 million in 2022. https://www.equilar.com/reports/101-equilar-associated-press-ceo-pay-study-2023. The U.S. Bureau of Labor says that in the fourth quarter of 2023, the average U.S. annual salary was $59,384.

Let’s go to the Forbes Income Tax Calculator for 2023-24. We’re looking at straight tax, no deductions, credits, write-offs, etc. for an individual.

The average wage earner in 2023 would pay $5,325 in federal income taxes, leaving $54,059. In comparison, the average CEO forks over a hefty $5,431,207 with a measly $9,368,793 to show for all their hard work after the federal tax man takes his cut. How do these business moguls scrape by?

And remember, the more money you have the more you can afford to sock away in tax-deferred or tax-free investments waiting for you to dip into in those golden years.

I don’t pretend to have a simple solution and I’m not looking to break out the guillotines for Marie’s modern-day cohort. But I do think I know what’s at the core of the problem that needs to be addressed.

We have an industry in this country that makes its bread by convincing people that taxes are an evil inflicted on them that should be avoided any way possible. It propagates the notion that there is no fair share. In fact, sharing is held up as something only dopes do.

Why is there so much time and effort put into avoiding having to pay taxes. We can argue over some of the specifics of what they go toward but there’s much that no one should quibble over – clean air and water, safe medicines and food, education, and national defense. And it seems people who complain about people on the dole or abusing the system seem to be just as interested in a free ride.

I offer as evidence Exhibit A: The IRS recently sent compliance letters out on more than 125,000 cases where tax returns haven’t been filed since 2017. The mailings include more than 25,000 to those with more than $1 million in income, and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021.

Call me a simpleton or a sap, you have a right to your opinion. And I have a right to mine. When times were most difficult, we have come through when we stuck together and made sacrifices for each other. Maybe we simply need to remember that the abbreviation for this nation is US not ME.

#retirement #aging