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Social Security is based on income, not wealth

If Social Security payments were based on net worth, Buffett would clearly be in line for the program’s maximum monthly payday. But since Social Security benefits are based on wages – specifically, your 35 highest-paid years in the labor force – most of Buffett’s wealth, which is in Berkshire Hathaway stock, isn’t factored into his benefits calculation. Rather, it’s just his salary that’s considered.

In 2023, Buffett took a $100,000 salary from Berkshire Hathaway. That’s reportedly the salary he’s earned every year for decades. If we use Social Security's benefits quick calculator tool and plug in Buffett's August 30, 1930 date of birth, we're told that his monthly benefit should be $3,245.00.

That's not the maximum monthly benefit Social Security will pay this year. The highest monthly benefit if you retire at full retirement age in 2024 is $3,822 and if you retire at age 70 in 2024, your maximum benefit would be $4,873.

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Does Warren Buffett actually collect Social Security – and should he?

Buffett has long been a fan of leveling the playing field and taxing the wealthy so they pay their fair share. It wouldn’t be surprising to learn that the investing legend has opted out of Social Security due to not needing the money.

That does, however, raise an interesting question: Should the wealthy be entitled to Social Security if they clearly don’t have a financial need?

Social Security is facing a funding crisis that could result in benefit cuts in about a decade’s time. If the wealthy were to be barred from collecting Social Security, it could help address the program’s financial woes.

However, Social Security differs from other government programs in that it’s not designed to be an entitlement program. Workers must pay into Social Security and earn benefits by accumulating enough work credits in their lifetime. Those who don’t meet that criteria don’t qualify for benefits in retirement.

To deny the wealthy their benefits after years of paying Social Security taxes would mean changing the whole nature of the program. And it’s unlikely that lawmakers will opt to go to that extreme – even if Social Security does need a lifeline.

Some more likely solutions proposed to save the program include raising the retirement age or raising the Social Security tax rate, which currently sits at 12.4%.

There’s also been a push to remove the payroll tax cap. This year, earnings above $168,600 aren’t taxed for Social Security. According to one estimate, millionaires stopped contributing to Social Security on March 2 this year.

How to boost your Social Security benefit

Since many people’s salaries fall below the $100,000 annual wage Warren Buffett collects, it stands to reason that many could expect a lower monthly Social Security benefit than he would be entitled to. But there are steps you can take to set yourself up with more Social Security income in retirement.

Here are a few.

Grow your skills to land promotions that result in higher pay. And if that doesn’t work, consider adding to your wage base with gig work you report and pay taxes on.

Also make sure to work for 35 years, since a shorter work history can result in lower benefits. And, if possible, aim to file for Social Security at age 70 for the highest benefit you can claim based on your personal wage history.

It could also pay to sit down with a professional and get their recommendation for claiming Social Security based on your overall financial picture.

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Maurie Backman Freelance Writer

Maurie Backman is a freelance contributor to Moneywise, who has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate.

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