The SSA averages your highest 35-years of earnings and then adjusts them to reflect the growth in wages using the AWI – average wage index.
Actually, you got the order of operations backwards. First, they adjust your earnings history using the AWI and then they computed the average. See the example here Social Security Retirement Benefit Calculation
And if you meant unrealized unearned income, that introduces even more issues.
No interest in taxing unrealized income. That's why I didn't include the term "unrealized" in my post.
without an income exclusion for lower levels of unearned income, taxing unearned income would hurt the middle class
Almost any change big enough to solve the shortage will have to impact a large part of the population. The most obvious example would be to raise the payroll tax rate.
The CRFB calculator mentioned in the comments doesn’t allow “what ifs” that would require new legislation be passed,
This comment makes no sense. Almost every option, if not every option, on the interactive tool would require new legislation be passed.
It is more focused on 1) changing the benefit formula to make it less favorable to beneficiaries and 2) tweaking revenue.
What else could one do to fix the problem other than decrease your costs or increase your revenue? On the revenue side this tool allows one to consider changing the payroll tax rate, broaden the payroll tax base and change how social security benefits are taxed. I won't call these tweaks.
Sure, there could be some more options. For example, under broaden the tax base they only consider ways to tax more earned income. Why not tax unearned income too?
Michael, got it and thanks for answering. Perhaps an idea for another article. Don't think I've seen anything about Net Unrealized Appreciation (NUA) rollovers on Humble Dollar.
That sheds some new light on the US verses foreign source income. However, I don't think that this is an issue that we as the shareholders of a US mutual fund have to sort out. The mutual fund company sorts it out. Looking at my consolidated 1099 from Vanguard this year I find in the Mutual Fund and UIT Supplemental Information section for Total International that 81.96% of the total income from that fund is foreign source income. From the Detail for Dividends and Distributions section I find that the Total Dividends & distributions from this fund is X amount. Thus, my foreign source income from whatever qualifies as foreign source income is 81.96% of X.
Comments
Post: Many seniors think we paid for our Social Security benefits based on the FICA taxes we paid. Let’s dispel that myth- we didn’t
Link to comment from June 20, 2026
Post: Just the facts about Social Security
Link to comment from June 14, 2026
Post: Just the facts about Social Security
Link to comment from June 14, 2026
Couple of typo's. In the first paragraph,
In the last paragraph,Post: Just the facts about Social Security
Link to comment from June 12, 2026
Michael, got it and thanks for answering. Perhaps an idea for another article. Don't think I've seen anything about Net Unrealized Appreciation (NUA) rollovers on Humble Dollar.
Post: Blood Money
Link to comment from April 5, 2026
Since you are selling stocks in your 401k why do you care what the cost basis is?
Post: Blood Money
Link to comment from April 3, 2026
Paul Ward specifically stated that outright gifting "exposes the property to the claims of the recipient's creditors" and NOT the giver.
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 18, 2026
Agree. But if the gift is to a child under eighteen who is going to sell it to pay for college you have to ask youself, what creditors?
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 17, 2026
Why not just gift the condo and avoid the expenses and hassle of a trust?
Post: Medicaid Asset Protection Trusts (MAPTs)
Link to comment from March 16, 2026
That sheds some new light on the US verses foreign source income. However, I don't think that this is an issue that we as the shareholders of a US mutual fund have to sort out. The mutual fund company sorts it out. Looking at my consolidated 1099 from Vanguard this year I find in the Mutual Fund and UIT Supplemental Information section for Total International that 81.96% of the total income from that fund is foreign source income. From the Detail for Dividends and Distributions section I find that the Total Dividends & distributions from this fund is X amount. Thus, my foreign source income from whatever qualifies as foreign source income is 81.96% of X.
Post: Taxes on foreign stocks
Link to comment from February 21, 2026