Don’t Count on Windfalls

cash windfall

I’ve spent the past couple of weeks listening to the bitter complaints over the “loss” of the two percent Social Security tax holiday. In case you’ve missed it (or you aren’t from the U.S. and didn’t follow our “fiscal cliff” debacle), here’s the gist: Two years ago our politicians reduced the Social Security tax rate from 6.2% to 4.2%. This resulted in a two percent “raise” for workers. Since Social Security needs that money to remain solvent, the cut was never designed to be permanent. It was a way to help stimulate the faltering economy for a little while.

Now that the cut has expired and tax rates have returned to their n

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6 Responses to Don’t Count on Windfalls

  1. You should never count on temporary money. I am actually getting a little tired of hearing about the tax “increase” as some like to call it. I knew my paycheck before and didn’t change my lifestyle because of some extra money. This made the “increase” manageable for me.

  2. creditcardfree says:

    Well said!

  3. LuckyRobin says:

    I don’t know of anyone making “bitter” complaints about it, so much as general disappointment or annoyed grumbling. And really, that 2% was most likely compensating for the well over 2% rise in the cost of food, gasoline, and electricity during that time period for many, many people while income remained stagnant or was even cut. Personally, I would not be so annoyed about the higher tax rate if the government had agreed to cut some of the spending, too, but it seems they want to increase the spending even more than the higher rate will compensate for, when what they should be doing is tightening their belts and trying to live within their means for once.

  4. Aleta says:

    I totally agree with you. To begin with that money should have gone to social security, yet we hear how social security is going broke. Next, it’s much like getting a raise or any new money that can be used to pay down debt or add to your retirement.

    The problem is that people got used to it and relied on it for extra money to spend. Had they payed down debt they would have seen their interest payments decreasing and maybe paying off that extra payment a month.

  5. Genny says:

    What people are forgetting is that this is our money; our hard earned income. The government forces us to participate in this insurance program, whether we like it or not, but that is not germane to this discussion.

    Yes, people spend foolishly. People spend beyond their means. But I do not fault the individual for choosing to do with the extra 2% in their paycheck as they wished, because it was their money, and they earned it.

  6. Gailete says:

    As self-employed people we never see a paycheck or a list of deductions, so I wasn’t actually aware of this cut or the un-cut. As someone that depends highly on Social Security due to disability I do get amused by people thinking that SS is a program they are being forced to participate in. If you became suddenly disabled, I’m sure you would be more than grateful for the benefits you would receive, also not germane to this discussion but an observation from someone that didn’t expect things like this to happen to them.

    If the reason that folks got that 2% windfall was to stimulate the economy, well the government wanted them to spend it frivolously or non-frivolously, but spend it please to stimulate the economy. I too would have probably tried to set it aside and not get used to it and since it was a fairly small amount for a weekly or bi-weekly paycheck, it could have been easily swallowed up into day to day living. Only those that are the most disciplined and with their financial lives in order are able to see that in a few years they would lose this amount and thus set it aside so they wouldn’t depend on it, just like some are advised to when you get a raise, set the raise aside and continue to live on the old income until you get yet another raise and they you can if you like, put the previous raise into active use.

    I do understand the living hand to mouth and I sure wouldn’t berate the people that did it. When I saw the title of this post I was thinking windfall as an inheritance, a huge bonus, winning the lottery to the tune of $1-10K kind of thing. Those things that seem like so much and then disappear so quickly. A small amount in your paycheck can make the difference between keeping the lights on or not to some, and now that option has been removed.

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