System working against you

You are a generation of good savers who is being punished for your hard work. On top of this, each year the tax brackets go up a little bit so that they are adjusted for inflation. This means the income needed to reach the 15% tax bracket goes up a little bit, the income needed to reach the next bracket goes up a little bit, and so does the income needed to reach all of the other brackets.

Your deductions are also indexed for inflation. So are your exemptions. In fact, everything is indexed for inflation except for your Social Security calulations. This means that since the IRS started taxing Social Security in 1983, they have not indexed any of those Social Security brackets for inflation. So when they came out with this back in 1983 if married and earn more than $32,000 or single and earn more than $25,000 50% of your Social Security income is taxed and those numbers have never been indexed for inflation.

Of course, in 1983, $32,000 was a pretty darn good income. At the time:

The average income was $21,073 a year
The average home cost $82,600
The average car cost $8,577

That was over 30 years ago. What is $32,000 going to get you today? Not much.

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