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Old 04-01-2015, 08:43 PM
 
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Quote:
Originally Posted by MadManofBethesda View Post
Not necessarily. Usually depends upon how much other income you have. In the example you quoted from the earlier poster, he was showing $4175/month from Social Security and stated that it would be 100% of his retirement income. In that example, his entire SS benefit would be free from all federal income taxes.

Now contrast that with say a couple whose combined SS benefit is only $2000/month, but also draw $5000/month from their IRAs. Even though their Social Security is less than 1/2 of the previous poster's benefit, since they have other retirement income, 85% of their Social Security benefit is taxable.

well that totally blows- penalized for saving ?-it figures
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Old 04-01-2015, 08:58 PM
 
Location: Grove City, Ohio
10,135 posts, read 12,392,750 times
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Quote:
Originally Posted by MadManofBethesda View Post
Not necessarily. Usually depends upon how much other income you have. In the example you quoted from the earlier poster, he was showing $4175/month from Social Security and stated that it would be 100% of his retirement income. In that example, his entire SS benefit would be free from all federal income taxes.

Now contrast that with say a couple whose combined SS benefit is only $2000/month, but also draw $5000/month from their IRAs. Even though their Social Security is less than 1/2 of the previous poster's benefit, since they have other retirement income, 85% of their Social Security benefit is taxable.
I found playing around with this to be a lot of fun and very educating.

How much of my social security benefit may be taxed?

Did you know that up to 85% of your Social Security Benefits may be subject to income tax? If this is the case you may want to consider repositioning some of your other income to minimize how much of your Social Security Benefit may be taxed and thereby, maximize your retirement income sources.

We're married, collect $4,175 from ss and draw $500/month from our IRA.

Based on the worksheet provided in the most recent IRS Publication 915, your Social Security benefit(s) of $50,100 will be 0% taxable increasing your taxable income by $0 and creating a federal income tax liability of $0.

There's never any FICA or medicare taxes taken out and most, but not all, states, even California, exempt social security from state taxes.

States That Exempt Social Security
Social Security benefits are not taxed in 27 states and the District of Columbia

Where I live I'll have a retirement income of $55,100 without having to pay any tax.

Now contrast that with a married couple receiving $30,000 in benefits and withdrawing $25,100 from his IRA account. Exact same amount of money but based on the worksheet provided in the most recent IRS Publication 915, your Social Security benefit(s) of $30,000 will be 14% taxable increasing your taxable income by $4,050 and creating a federal income tax liability of $1,013.

Remember, that federal income tax liability applies only to your ss benefits... if you have a job the tax liability could be a lot higher.

But don't count the IRA, if take home is $4,175/mo how much from a job would someone have to gross to end up with $964.20/week? (4.33 weeks in a month).

Using paycheck city in California (married couple) the job would have to pay $1,275/week to generate a take home pay of $970. Poor, poor me... I earn 24% less than the guy who goes to work every day. Maybe I can get food stamps?

The median household income in the US is $50,502 and we hear stories about retirees having to suffer on 30% less money, $35,351 for $2945/month, and I don't buy the suffering. With not having to pay any taxes of any sort the 30% is nowhere near 30%. Gross of $971 gives a net of $768 in California for a weekly difference of only $87.86 and I don't think you can go to work (second car and all) for $87.86/week.

One other thing.

I don't look at ss as a break even or get all my money back thing. I don't know when I am gong to die it could be one year after I retire or 30 years, who knows? What I do know is for however long I am alive and unable to work I want to have enough to live very comfortably.
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Old 04-01-2015, 09:09 PM
 
290 posts, read 298,089 times
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exit82, that reminds me of a related question. I've always been under the impression that the first thing someone should do for retirement investing is investment in a 401k up to whatever the employer matches. After that, though, I always thought a Roth IRA made the most sense since you pay taxes on it up front and it grows tax free.

But a coworker who used to work in finance said a Roth IRA isn't a better idea because most people's retirement income is lower than their working years, so you'd end up paying less in taxes with a traditional IRA. I still think it makes sense to do the Roth since you get X-years of tax-free growth. Any thoughts on figuring out the break-even point for where Roth versus traditional IRA makes the most since in terms of bang for your buck? I am in the 25% federal tax bracket now. Even if I stayed in that in retirement it is:

Tradtional IRA - Paying 25% on all growth from my entire working life and no taxes on it initially.

versus

Roth- Paying 25% up front and then only paying 25% on my non-Roth investments (social security and a pension if I have a job like that, I guess?) and 0% taxes on my Roth stuff.

The latter seems like a no-brainer. Or am I missing something? Is this only more of a question for people who are older when they begin investing in an IRA of some sort? It just seems like you'd have to be rather close to retirement for the Roth to not be the way to go unless I am way off base.
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Old 04-01-2015, 09:10 PM
 
Location: Grove City, Ohio
10,135 posts, read 12,392,750 times
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Quote:
Originally Posted by bpollen View Post
The lack of retirement funds really is a problem for most boomers, I think. Remember that we just got out of a huge recession, in which many people lost a lot of their 401k savings to the stock market crash. The cost of living has continued to rise, at the same time. Other people haven't saved enough, to begin with. And a lot of older people were laid off during the recession.

I worked for 40 years. My SS will be maybe $24,000, if I'm lucky. I'm female, and we all know that women have been paid less than men for many years. So the poorest retirees will be women, as has been the case throughout our country's history. It might be better for women going forward, but boomers worked at a time when it was legal not to hire you because you were female, and it was legal to pay you less because you were female. That affected not just the money we earned and our standard of living at the time, it affects our retirement and everything else for the rest of our lives.
Not addressing anything but the money.

I understand it isn't for everyone but what about working longer to age 70?

If at 66 your benefit is $2,000 working just four more years will increase that by a little over 32% which will will call $2,600 just to keep it simple.

That's an additional $600/month and the best way to look at this is to ask the question "how much would I have to have in an IRA account to withdraw 4% per year which is the minimum the federal government allows?

You would have to have $150,000 in an IRA to withdraw 4% for $600/month.

Take that $150,000 and divide by four years to arrive at $37,500 per year.

Simply deferring social security for four years is as you deposited $37,500 tax free dollars into your IRA account every year. That's $721/week in addition to your pay so if you are making $700 it is as if you were earning better than $1,500/week when you figure taxes.

$600/month extra can mean a lot because it is a lot.

If you can do it and I understand if you can't. If I didn't have the job I have I couldn't so color me fortunate.
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Old 04-01-2015, 10:13 PM
 
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Quote:
Originally Posted by nicet4 View Post
...

If social security was 100% of our income when you figure we would not pay any federal or state taxes that's equivalent to having a full time job paying $67,000 per year here in Georgia. Boo hoo!
nicet4, I know the question has come up before, about SS being taxable. I know it's not taxable in GA. Can you help me understand how $67K in SS benefits are not taxable at Federal level?

Thanks! - Jane
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Old 04-01-2015, 11:54 PM
 
6,353 posts, read 5,163,159 times
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Quote:
Originally Posted by BellaDL View Post
The stats don't lie! The retirement crisis may not feel real to people who have already retired or very close to retirement. All the trends (income growth, widening gap income inequality with the least # of people owns the most, reduction/disappearing of private pension plan, retirement saving, 401K participation rate) all point out a not rosy or even very bleak future for future retirees.

Median Household Income Analysis by Age Bracket

Median Household Income Analysis by Age Bracket
I write for Advisor Perspectives and I highly recommend it as a source of useful and thoughtful information.

That said, the medians in Doug Short's analysis mask huge differences among retirees and pre-retirees. There is a crisis if a lot of people are not well prepared for retirement, even if a large number of other people are well prepared. So, in my opinion, there is a crisis.
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Old 04-01-2015, 11:59 PM
 
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Quote:
Originally Posted by bpollen View Post
Where did you go to school? Did you not notice I said women WERE paid less? I didn't say that ARE paid less.

I hope you're not paid much, since you can't read very well.

I am 61. Yes, Virginia...it was legal not to hire women for jobs. Perfectly legal, and most people thought it correct. You didn't want to hire a woman for a job that a man might need. That was the thinking, and that was perfectly legal.

It was also legal to pay women less. It was common think that women would of course be paid less than men, since they weren't heads of household and responsible for providing for a family. Men were. This was the common thinking back then, and it was LEGAL. It was not thought to be incorrect thinking, either. Many women agreed. Most women were married.

I can't count the conversations I had, or heard, where it was discussed why it was not a good idea to hire women for jobs. It was commonly thought that they just weren't as good workers as men were, and besides, their place was in the home. This was not thought to be wrong at all. It was the way most people thought, and acted on. And it was LEGAL.

That resulted in lower pay for the women who did work, which affected the standard of living at the time, and their Social Security. Throughout our country's history, it has been WOMEN who have been the poverty stricken elderly. Not men.
Sounds like you should have planned a little better then. It's always someone else's fault. If you worked for 40 years , you could have certainly saved some and invested it ...even if it was $100 a month. Or why didn't you advance more in your career? And you didn't say"were." You said "have been" which implies it's not necessarily happening now or possibly not even in the recent past. And the stock market and "recession" (which really doesn't correlate with stock market gains anyway) is up almost quadruple from where it was at the lows, by the way. The 401kers should be dancing in the streets!!

Last edited by Burkmere; 04-02-2015 at 12:09 AM..
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Old 04-02-2015, 01:17 AM
 
2,429 posts, read 3,225,700 times
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Quote:
"Crisis" or not, no one seems to have anticipated the "convergence" of so many factors, and so soon… including increasing life spans, the emerging global economy, changing social trends, hi-tech, and the cascading impact of such large 'demographic groups' (Boomers, Gen-X, Millennials, etc.).

But the basic fact is that all the old notions of 'aging' and "retirement" (and the length to reach 'maturity'.. among others) are all "in transition", and no one's really figured out yet where it's headed in this country (let alone in the fast developing rest of the World)!
1) On one hand I want to ask, isn't this what we pay our politicians for -- to figure all this out. But then again I actually want them OUT of more aspects of people's lives. BUT IF they're going to muck about -- they have a DUTY to figure this crap out. And NOT just by redistributing wealth....forcibly taking from one person to give to another.

2) I'm not a politician, nor an economist, nor a rocket scientist -- but as a late baby boomer I -- and anyone who's paying attention (HAH!) -- can tell you that:
a) if competition for jobs goes global -- that may not be great for wages
b) if fewer people pay into a system where to take from them to pay for a larger generation of people....and
c) investments don't make enough to support that....
d) and people live longer....and
e) other costs (health care) go up.....

...there could be a MESS, disaster, whatever....
As a tale-end baby-boomer I fear I'm going to get sc re wed...eventually...and there WON'T be a smile on my face.

So retirement and/or health care crisis overlapping or hitting at once?...heck yeah I think it's going to happen. I just hope I'm not affected by any changes that may come, by either being to old or close to retirement...or having so much money I don't care. (both of which I doubt)
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Old 04-02-2015, 01:47 AM
 
2,429 posts, read 3,225,700 times
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I know this isn't the topic of the thread, but since posts veered off into SS taxation, I figure I'd ask....

1) I want to be sure I'm correct....if a person's ONLY income if from SS...no matter how much....NONE of it is taxed? Correct? the 24K and 32K income threshholds are moot?

2) And I think I must be drawing a blank on this...what are a couple of strategies for a person who's pension and 1/2 of SS will put them over the limit for NOT having SS taxed. If I take my pension and SS both at 62 I'm over the 24K for singles. Is my only option -- take the pension...delay SS, and if I need more -- draw down my own accounts -- but just watch how much I draw down? (if I'm not going to work, of course) Anything else to do?

Last edited by rdflk; 04-02-2015 at 02:57 AM..
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Old 04-02-2015, 02:07 AM
 
71,651 posts, read 71,801,099 times
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Quote:
Originally Posted by bpollen View Post
Social Security isn't tax free, is it? Part of it is taxed, I thought.
it could be tax free depending on income.
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