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Alternatives to Personal Retirement Accounts

2. How Does Social Security Work?. Each worker pays 12.4 percent of the first $84,900 of his wages into Social Security. (Technically, his employer pays half, but economists agree that employers reduce wages to make up for this, so the whole burden is on the worker.)10.6 percent of the tax pays for

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Alternatives to Personal Retirement Accounts

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    10. 10 What is a “Benefit Cut”? Many critics charge that reform plans would “cut benefits.” But versus what? For instance, an average wage worker retiring in 2042 is promised a benefit of $896 per month (in today’s dollars). Under one of the President’s Commission’s plans, that same worker would receive $806 from the traditional system, a “cut” of $90. But this ignores that… Under law, the insolvent Social Security system can actually afford to pay that worker just $655 per month, plus… The personal account would add $180 per month, raising total Social Security benefits to $986 per month. That’s $90 more than the current system even promises, and $331 more than it can actually pay.

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