Saturday, January 15, 2011

What Are You Doing with the Social Security Payroll Tax Cut?

I got my first paycheck of 2011 and it was more than I expected. (This is partly due to the fact that I reduced my 401k contributions by 1% back in August because I would have otherwise maxed out my 401k contributions before my last paycheck and missed out on some of the company match.) But it looks like my Social Security payroll tax cut accounts for an additional $80 per paycheck or so.

I'm not too thrilled about this tax-cut, though, because I've always been worried about the solvency of the Social Security program when I retire. As a sign that we probably can't afford this tax cut, the government is borrowing $112 billion to make Social Security whole.

I guess the thought behind the SS payroll cut is to stimulate the economy. Unfortunately, I'm probably not going to put the money back into the stream of commerce. I intend to use the money to pay down my private student loans and/or to increase my Roth IRA contributions. I guess I'm no better than the companies that are hoarding cash rather than hiring, despite tax cuts and other government cheap money.

If I'm worried that I won't be able to collect on Social Security, I might as well reduce my debt and sock this money into my Roth, right? But does this make me a bad citizen? Maybe to alleviate my guilt, I'll continue to buy I-Bonds despite the less-than-thrilling rates they've been giving lately.


Anonymous said...

I calculated how much extra I'm getting this year and added it to the auto-transfer to savings I set up after my last raise. Basically, I'm making it so the "extra" goes to my down payment fund, so I never see it in my regular checking account.

I'm not sure if I'm actually the type to see extra money in my checking account and decide to spend it. So the auto-transfer might not be necessary for that. But I don't do any manual transfers, so at least it's something.

We might both be bad, using our "extra" towards paying debts and saving for future expenses. Oh well. I'm sure there are plenty of other people out there who are stimulating the economy at the car dealerships, malls, and online stores...