Many working Americans preparing for retirement (regardless of their age) have questions about saving and investing for the future, Social Security, and the federal program’s future viability.
Author and podcaster Todd Galloway starkly addresses one Social Security policy detail with a brief statement explaining his controversial opinion.
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One question people often have about Social Security involves whether its benefits are enough to solely rely upon during retirement.
The consensus among retirement experts is that the answer is no; other savings and investment vehicles need to be planned for during one’s working years.
Related: Scott Galloway warns Americans on Social Security, retirement money
The most common retirement savings tools Americans use to free them from future dependence on Social Security monthly paychecks are employer-sponsored 401(k)s and tax-advantaged IRAs (Individual Retirement Accounts).
Many wonder which of these is most effective for retirement savings. The answer is that both, used in combination, is a smart approach.
Because a 401(k) usually involves an employer match up to a certain percentage of an employee’s income, one good recommendation is to take the match up to its maximum, and invest the rest in an IRA.
Roth IRAs are often recommended, because taxes are paid up front, which allows for withdrawals in retirement to be made tax-free.
Another concern people have about Social Security is whether it will be around when they retire. Without legislative action, it is reported that its Old-Age and Survivors Insurance (OASI) Trust Fund will run out of money in 2033.
At that time, continuing Social Security income would only be sufficient to pay recipients 79 percent of their expected benefits.
Galloway, however, has a strong opinion about another policy issue regarding how Social Security is funded.
A retired couple is seen holding hands and walking on a beach. Author and podcaster Scott Galloway has a blunt opinion about the Social Security tax workers confront every paycheck.
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Scott Galloway explains the Social Security tax in 6 words
Galloway explained a blunt opinion of his on a different fight he would choose about how Americans should pay for Social Security.
“I mean, the Social Security tax,” Galloway said in a statement he posted to Instagram. “Let’s say you’re making $150,000 a year. You pay $9,000 a year or approximately 6% in Social Security taxes. If I make $1.5 million a year, I pay — wait for it — $9,000 a year. Social Security tax tops out at 160K.”
Galloway then boiled his opinion about the Social Security tax down to a very brief statement.
“That makes it a regressive tax,” he said.
Generally speaking, a regressive tax is one that is more of a burden on lower-income people, because the amount of the tax applies uniformly, regardless of one’s income level.
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“So this just reflects what has happened across every industry and that is income inequality within the industry,” Galloway continued. “CEO compensation is out of control. I don’t know if there’s anything you can do about it.”
“What you can do is at least have them pay their fair share of taxes.”
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Scott Galloway believes Social Security should be means-tested
In the past, Galloway has expressed an opinion that he believes, as someone who makes $16 million per hear, he should not be eligible to collect Social Security.
“They call it a Social Security tax,” he said. “There are a lot of taxes I pay where I don’t register the benefits. It’s not called the Social Security Pension Fund.”
Galloway explained that, over time, most people who collect Social Security end up taking out two or three times the amount of money they pay into it via the Social Security tax.
This, Galloway said, is an argument for means-testing.
The thinking is that Social Security monthly benefits mean a lot more to a person for whom it is a larger percentage of their overall retirement income than to a person for whom it is only a small percentage.
That being the case, Galloway believes that for people at a certain income level, Social Security paychecks are simply not necessary.
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