Warren Buffett shares thoughts on Social Security
Social Security has long been a subject of intense discussion in America, but investing legend Warren Buffett’s position on the issue is unmistakably clear.
During Buffett’s company, Berkshire Hathaway’s, annual shareholders meeting in 2005, an audience member posed a blunt question: “I’m asking for your opinion on Social Security. Shall we call it the government-sponsored Ponzi scheme for retirees?”
Don’t miss
- Commercial real estate has outperformed the S&P 500 over 25 years. Here’s how to diversify your portfolio without the headache of being a landlord
- Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead. Get in now for strong long-term tailwinds
- Take control of your finances in 2024: 5 money moves to start the new year off strong
Buffett first clarified the true nature of Social Security.
He explained that, while it was proposed as insurance because that was “the only way [President Franklin] Roosevelt could get it passed,” Social Security is essentially a “transfer payment by the people who are in their productive years to the people who are past their productive years.”
And Buffett liked that mechanism.
“I think that the obligation for the people who do well in this society is to provide a reasonable level of sustenance for those beyond their productive years,” he said.
‘One of the most successful things the government has ever done’
Buffett’s right-hand man, the late Charlie Munger, was an even bigger supporter of Social Security.
Despite being a self-described “right-wing Republican,” Munger strongly defended the program. He said that he felt more strongly than Buffett that the Republicans who were challenging Social Security were “out of their minds.”
His remarks were met with laughter and applause from the audience.
Munger was generous with his praise for the program.
“Social Security is a very capitalistic institution with profoundly good effects,” he noted. “It’s one of the most successful things the government has ever done in terms of efficiency and good effects.”
Buffett’s prescription for Social Security
Buffett also shared with the audience what he would do if he were at the helm of the Social Security program.
He took issue with the Social Security wage base, which is the maximum amount of earnings that are subject to the Social Security payroll tax in a given year. In 2005, the amount was pegged at $90,000.
“Right now we quit taxing for Social Security at $90,000. But — and that means that everybody in my office is paying — or most of them — are paying 12.4 — 12.2 or 12.4 percent, counting what the company contributes, toward this,” he said.
Buffett pointed out that because this payroll tax ceased to exist at earnings over $90,000, higher-income individuals, including himself, pay a lower proportion of their total income towards Social Security. He criticized this as “sort of nonsense in this society.”
Advocating for a change, Buffett proposed a substantial increase in the Social Security wage base.
“I would lift the $90,000 way up. In fact, I might apply it, you know, on all incomes. Then you’d really get people’s attention,” he said.
Since his 2005 remarks, the Social Security wage base has indeed risen substantially. For 2024, it stands at $168,600, an increase from the 2023 limit of $160,200.
Furthermore, Buffett expressed his support for increasing the retirement age.
I would certainly increase the retirement age,” he suggested. “I mean, the world in 2005 is much different than the world in 1937, in terms of longevity prospects and the ability to function productively.”
Buffett’s observations are well-founded. When President Roosevelt signed the Social Security Act into law in 1935, life expectancy in America was only 59.9 years for men and 63.9 for women. Fast forward to today, and these numbers have increased to 74.8 for men and 80.2 for women.
What to read next
- This Pennsylvania trio bought a $100K abandoned school and turned it into a 31-unit apartment building — how to invest in real estate without all the heavy lifting
- Jeff Bezos and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
- The US dollar has lost 87% of its purchasing power since 1971: Learn how to diversify your portfolio by investing in the world’s most popular precious metal
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
News Related-
Russian court extends detention of Wall Street Journal reporter Gershkovich until end of January
-
Russian court extends detention of Wall Street Journal reporter Evan Gershkovich, arrested on espionage charges
-
Israel's economy recovered from previous wars with Hamas, but this one might go longer, hit harder
-
Stock market today: Asian shares mixed ahead of US consumer confidence and price data
-
EXCLUSIVE: ‘Sister Wives' star Christine Brown says her kids' happy marriages inspired her leave Kody Brown
-
NBA fans roast Clippers for losing to Nuggets without Jokic, Murray, Gordon
-
Panthers-Senators brawl ends in 10-minute penalty for all players on ice
-
CNBC Daily Open: Is record Black Friday sales spike a false dawn?
-
Freed Israeli hostage describes deteriorating conditions while being held by Hamas
-
High stakes and glitz mark the vote in Paris for the 2030 World Expo host
-
Biden’s unworkable nursing rule will harm seniors
-
Jalen Hurts: We did what we needed to do when it mattered the most
-
LeBron James takes NBA all-time minutes lead in career-worst loss
-
Vikings' Kevin O'Connell to evaluate Josh Dobbs, path forward at QB