January 18, 2013

Maximum Lifetime Social Security Taxes at $141,067

I just saw another person comment on the internet saying something along the lines of "I've paid more to Social Security than I'll live long enough to get back" and this was from someone who is currently 60.    Some people have this idea that they've paid some sort of giant kings ransom into Social Security.   However the maximum anyone has paid is not as high as you might think.

The maximum amount anyone could have theoretically paid into Social Security is $141,067.  

That number assumes someone worked for 76 straight years paying the maximum amount which is not really feasible. 

If you worked the past 47 years at maximum income then your total Social Security taxes paid would add up to $138,961.

Thats a little closer to feasible but still unlikely that anyone would have a 47 year long uninterrupted work history starting at age 18 and making the maximum income.    But there are probably 1 or even 2 people in the entire country who have paid that much due to some odd circumstances.

You can figure the maximum Social Security tax paid simply by multiplying the social security tax rate over the years by the maximum income.   For example back in 1937 the tax rate was 1% and the maximum income was $3,000 so the maximum anyone paid was $30 or in 2008 the rate was 6.2% and the max income was $102,000 so the max tax was $6,324.   Note that I figured in the 2% payroll tax cut for the 2011 and 2012 years.

That persons lifetime maximum income would sum up to $2,489,900.    They would have paid 5.67%  of that into Social Security.    They would be eligible for the maximum Social Security benefit which would be $2,513 per month or $30,156 per year.    If they live just 5 years they'll get all their money back and then some.   Everyone else would have a shorter pay back period.  Thats because the maximum income level has the least generous benefit rate. 

Of course I'm not talking about inflation impact or the return of investment of the money.  I'm simply looking at the nominal value of the taxes paid.


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