Paul Jacob

January 6, 2013

Congress has just raised payroll taxes. It has done it before, and will do it again.

Our august solons excuse themselves, however, by pleading that the 2 percentage point hike is merely the sunset of a tax holiday. And necessary to shore up a faltering system.

It’s not a triumph of responsibility, though.

What is responsibility? Every year the Social Security Administration sends out a helpful note to its “clients” about how much we’ve contributed in payroll taxes. The kindly bureaucrats also warn us not to rely only upon Social Security payments. They don’t tell us that there’s no guarantee, or that the fund is in jeopardy. They simply inform us that the system is there as a bottom-end safety net. One shouldn’t rely upon it alone.

So, how much money should a responsible person take from current income and set aside for the future — particularly for retirement?

Forget government for a moment. This is a vital question that every person should ask himself or herself, as well as help each other by talking about savings strategies, investment plans, etc.

It’s worth remembering that people who save money sometimes refer to the act of saving — the decision and the follow-through — as “paying yourself first.” You take your paycheck, and then you pay your future self. By saving. Somehow: put it in a special account, buy gold, buy stocks, hide sawbucks under your mattress.

So what would that regular amount be? A set dollar figure? A percentage?

And if a percentage, which percentage — 2 percent, 4 percent, 12 percent, more?

This vital personal and social question has been muddied by Social Security. The program takes from you, and — if you survive — gives you some money back after you retire. Many people think of that amount as their retirement savings. And no wonder: for, though the tax started out at the program’s inception at about 2 percent, it has been raised quite a number of times, now to well above the “tithing” amount. And now with the “fiscal cliff” deal, even higher.

Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.