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Old 01-31-2017, 02:14 PM
 
Location: RVA
2,167 posts, read 1,266,787 times
Reputation: 4460

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Quote:
Originally Posted by artillery77 View Post
I stand corrected. I didn't realize it was 35 years. As for gaming it with my small business, you couldn't be further off the mark. I get to pay not only my share of social security and medicare, but I also get to match it, so my contribution comes in at 15.3%, which I max, but not in tremendous excess. My wife doesn't quite max it.

Let's not forget in that range, we're starting to see the larger tier of the income tax payments as well for both Federal and State...

So basically, I bill $1 and the government and I split it about evenly. My wife and I will have paid nearly $1M into this SS program by the time I'm ready to retire and will likely have nothing more than a benefit that is taxed back to the government. I'd like my even share to be honest, and to not have it hauled back by taxes, after paying twice my share all these years. If it's $1500 across the board so be it. How big would anyone's 401K be if they'd saved 15.3% in it every year? How much harder is it to save your own 15% 2nd...not to mention business expenses.

CA just passed a new rule for businesses with as few as 5 employees to pay into their state retirement program. It's mandatory to sign up employees and up to them to get through the state. The program isn't ERISA qualified and people have no control. Sound familiar?

As the government keeps putting more on employee benefits, companies are going to keep shifting work to contracted arrangements and while we are law abiding and can handle the reporting responsibilities, many people aren't. Income will be underreported and taxes will be underpaid.
You misunderstood what I said about gaming the system with a small family business. I was referring to middle school earned income. If you had a small family business back in the 60s & 70s when I (we?) were in middle school, it was not unusual (though probably pretty illegal) to pay your kids to be employed, since their income would be low enough to pay no income tax and no SS. The kids never saw the money as income of course, but that amount could be cut right off the top for mom or dad, and reduced their tax and SS bills. It was common enough that I knew about it in high school though I didn't understand the exact reasons. I had friends that like me had immigrant parents, and owned small businesses, that couldn't get after school or summer jobs (unless they paid cash) because "I have to work for my family because of taxes". Their parents would simply tell them that it was the only way to save money for college for them.
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Old 01-31-2017, 02:19 PM
 
2,499 posts, read 6,393,913 times
Reputation: 2257
I retired from Bell after 34 years at age 55,1988,took SS at 62,$980 and now $1300.
I am fortunate to have good health & Dental along with Medicare deductible paid by pension.
SS payment has passed pension,we have never had a cola in pension.
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Old 01-31-2017, 02:45 PM
 
Location: OH>IL>CO>CT
5,237 posts, read 8,406,103 times
Reputation: 7191
Quote:
Originally Posted by Perryinva View Post
You aren't being penalized for saving. You are being penalized for thinking that saving and sources of income in retirement are the same thing. You realize NOW, that if you could do it over, you would put way less in to a 401k or tIRA, and instead invested after tax in munis or other LTCG dividends that are taxed at a much lower rate, provide income, and are not subject to RMDs that suddenly force your MAGI in to an area where you now pay tax on 80% of your SS. You could have the exact same income, and not pay an extra $2000 in taxes on your SS. In essence, you are being taxed later at an effectively higher rate to make up for paying no taxes when you earned that money. Once the bulk of your savings is stuck in deferred tax accounts, it's impossible to get any significant sums out without paying regular income tax rates on both earnings and appreciation, where it drags the rest of your income in to a taxed state as well. It is far better to have $75k in a Roth than $100k in a tIRA, if you are in the 25% bracket when married, and even more so if you find yourself single in retirement after being married your whole life. You would not have thought, back in 2000, when Roths came about, and you were 55, that to open one made any sense. I thought the same thing and delayed opening my Roth until 2008 at age 50, when I FINALLY read enough to realize that regardless of the so called "tax wash", it could be worth way more. When the back door Roth rollover became law, I switched almost everything to after tax 401k and roll it in to the Roth once a year.

I have been trying to explain this exact same phenomenon to people that keep spouting the same "delay paying taxes as long as possible" logic as the smartest thing to do. Above a certain income range, it makes no sense to save everything tax deferred. You WILL pay more later, even if you are at the same rate. Because I still have SOME time, and we both will get pensions that total over $60k, I put almost everthing in to after tax savings, after tax 401k to roll in to Roths, and Roth direct. I will use my pre tax IRA accounts to fund delaying my SS as long as possible.
Yes, in essence all that I learned too late to do me much good.

One thing I did learn to do was start IRA withdrawals before RMDs started. From age 62 to 70.5, I did what they call "topping up the bracket". That moved some money out of the IRAs, while I was in the 10 & 15% brackets. I delayed starting SS until age 70.
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Old 01-31-2017, 03:01 PM
 
71,626 posts, read 71,751,865 times
Reputation: 49222
a lot who delay ss miss the ultimate gift from the tax gods . between 62 and 70 you can draw 22k out of your ira's totally tax free using just the standard deductions . you can draw 42k and pay just 4.50% in tax .
that is money deducted at higher brackets when working . not only does it reduce rmd's later but you grow the ss check too .
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Old 01-31-2017, 03:26 PM
 
1,463 posts, read 1,347,261 times
Reputation: 1162
Default Has anyone calculated ...

what the same amount deducted from a paycheck over the years for social security would earn in a stock fund investing in every stock represented in, say, the DOW?
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Old 01-31-2017, 03:37 PM
 
71,626 posts, read 71,751,865 times
Reputation: 49222
how long is a rope ?

markets have no guarantee, that makes pretty poor insurance if timing is bad . there is no guarantee you will keep up with inflation invested on your own either nor even stay the course in a bear market .

all in all you are comparing apples to oranges . the investing you should be doing on your own and ss is your backstop .
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Old 01-31-2017, 04:13 PM
 
Location: RVA
2,167 posts, read 1,266,787 times
Reputation: 4460
Quote:
Originally Posted by reed303 View Post
Yes, in essence all that I learned too late to do me much good.

One thing I did learn to do was start IRA withdrawals before RMDs started. From age 62 to 70.5, I did what they call "topping up the bracket". That moved some money out of the IRAs, while I was in the 10 & 15% brackets. I delayed starting SS until age 70.
Then you did about everything right that you could. Hopefully you had excess funds from topping the brackets that you could invest in lower tax income vehicles. At least you did what you could to reduce RMDs. I will be doing the same thing from 62 until 70.5, hopefully rolling over the topping out in to Roths. What I haven't compared is what ends up with more after tax income and savings: draining the Roths (and HSA) before 70.5 to delay filing SS, & to have the absolute lowest tax possible by filing Married Separately, during those years, but a much higher RMD and taxes anytime I take a large sum from the IRA. OR save the Roth for later large expenditures and build it and reduce RMDs. Once I hit 70.5 I can never get below the 25% bracket, regardless.
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Old 01-31-2017, 05:33 PM
 
5,429 posts, read 3,450,730 times
Reputation: 13709
Quote:
Originally Posted by TwinbrookNine View Post
If They need to end the spouse benefit stuff. Now. Women have been out of the laundry room and kitchen for 40+ years now.
Quote:
Originally Posted by TwinbrookNine View Post
Just because you sleep with someone for X number of years you get SS money for that? What is SS? A popularity contest? Is staying single illegal or something?
TwinbrookNine, your comment right above is funny, but also very insightful and truthful! great insight.

I like your take on Social Security!
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Old 01-31-2017, 05:34 PM
 
Location: Texas
1,971 posts, read 1,375,321 times
Reputation: 6745
I did everything wrong, retired at age 50 in 1990, SS at 62 about $1700 today. Wife SS at 62, approximately $1500 today. Our income is about $10K per month. We only file the standard deduction and our adjusted income tax is about 12%. We have been using turbo-tax, and hope this is correct. Iím happy with this tax amount.
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Old 01-31-2017, 06:53 PM
 
Location: Haiku
4,101 posts, read 2,576,815 times
Reputation: 6051
Quote:
Originally Posted by Mistermobile View Post
what the same amount deducted from a paycheck over the years for social security would earn in a stock fund investing in every stock represented in, say, the DOW?
There are lots of variables in such a calculation - it depends on how well the stock market does, depends on how long you work, it depends on how much you earn during those years, depends on the FICA tax rate, and it depends on what all is in the DOW (it changes compositions often).

But, just for grins I took a stab at this. It we assume you work for 40 years, and that your contribution to a stock market fund is the maximum current FICA of $1740 and that the stock fund is the S&P 500 (which I have data for), and that the stock market does the historical average of about 7% real (inflation adjusted) return, then after 40 years your stock account will be worth $380,000.

But realistically it could be way more or way less. Such is the stock market.

Now the other question here is how long will that money last if you start spending it down when you retire? If we assume the spend rate is the same as the maximum SS benefit of $31,400 at FRA (which is what you would get with the assumed work history), and that you leave the money in the stock market so it continues to grow while you are spending it down, then your chance of running out of money within 30 years is about 62%, which is pretty high.

Again, this is highly variable as there are many factors involved. But in general, SS is a better deal. It is guaranteed regardless of how well the stock market does and it has no end date. If you live for 40 years beyond FRA it will continue to pay.
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