Social Security: Why Are Taxes Going Up While Benefits Go Down?

Recent research shows that most retirees will now pay more into the Social Security system than they get out of it.

Aug 3, 2014 at 9:00AM

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There's a pernicious trend impacting Social Security taxes and benefits that will likely catch many retirees by surprise. Not only are Americans paying more into the system during their working years, but they're also getting comparatively less out of it once they retire.

The results of a leading study on this topic shows what's going on here. Prior to 2010, the average retiree received more in benefits than he or she paid in Social Security taxes. From that point forward, however, the opposite has been true, and things are only getting worse.

What's to blame? Demographics. As the baby boomer generation ages, the burden on the Social Security system increases. And as this happens, the Social Security Administration, or SSA, has responded by gradually increasing the retirement age.

As Motley Fool contributor John Maxfield discusses in the video below, the net effect of this is a longer window during which you pay into the system and a shorter window during which you draw out of the system.

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