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Essay on The Future of Social Security - 123HelpMe
However, while "Social Security is designed to provide low-income individuals with higher returns on their payroll taxes, their shorter expected life spans almost fully offsets the benefit formula's progressivity," notes Cato Institute's Jagadeesh Gokhale. Similarly, Harvard University's Martin Feldstein finds that the progressivity of the benefit formula "is offset by the longer expected life of higher income individuals, their increased use of spouse benefits, and the later age at which they begin to work and pay taxes."
Social Security Essay - 983 Words | Major Tests
Also unlike a private pension plan, Social Security benefits have only a vague relationship to the contributions that workers made. In determining a person's benefits, the Social Security Administration (SSA) calculates the Average Indexed Monthly Earnings (AIME). All earnings upon which a person has paid Social Security taxes until the age of 60 are indexed for wage growth. The indexing formula is based on the ratio of the average national wage in the year the individual turns 60 to the year to be indexed. Wages earned after age 60 are not indexed. The SSA then takes the average of the 35 years in which wages are highest to determine the career average annual earnings; these wages are divided by 12 to arrive at the AIME.