Social Security is an important source of retirement income, but you end up paying for it throughout your lifetime through Social Security taxes. Over time, those taxes have risen dramatically, but you might be surprised at just how much more Social Security collects in taxes now compared with past years.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at Social Security taxes over time. He notes that when the program first began, it imposed a 1% tax on earnings of up to $3,000, making the annual maximum tax $30. Since then, though, tax rates have risen to 6.2%, and the maximum earnings on which taxes are collected has soared to $117,000, making the net result a maximum annual tax of more than $7,000. Dan points out that benefits have risen by leaps and bounds since the beginning of the program, too, but it's still important to pay attention to what you pay in taxes to see whether Social Security is a good deal for you.
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.