Total tax burdens

[GeoffD]

Originally Posted by M3 Mitch

On the other hand the high-tax states are "hiding in plain view" - NY, NJ, CA, MA, etc.

You have to run your particular numbers on your income stream and on a specific house in a specific town to decide whether a state is high tax or not.

I picked a relatively low housing cost area of coastal Massachusetts as my retirement spot for when I intend to retire at age 65 8 years from now. My town has roughly a 1% tax on assessed value. My paid-for retirement house has a $2,500 property tax bill. Massachusetts doesn't tax Social Security. I pay a 5.15% flat state income tax on 401-K/IRA distributions. There is a 6.25% sales tax but the state doesn't tax food and clothing.

If I lived in, say, Winchester, Ma in a desirable inner Boston suburb where I used to own a big house on an acre, I'd be paying $20K in property taxes. That's simply not possible in a Social Security check and what I've managed to put away in IRA/401-K accounts.

I last lived in Portsmouth, NH for a decade. Even with no income tax and no sales tax, the very high housing cost and high property taxes made it impossible for me to consider retiring there. I ran the numbers at age 50 and moved to a place where the numbers worked better.

The "hidden tax" I pay in New England is high energy costs compared to most of the rest of the country. New England has a natural gas pipeline capacity problem. I pay 20 cents per kWh for electricity. My natural gas costs for heating are quite high by national standards.

[BellaDL]

Originally Posted by GeoffD

I question your math since I have similar numbers and have worked through this. The maximum possible check at FRA is $32,748.
.... You'd have to live to age 100 to break even collecting at FRA if you calculate accounting for inflation.

I played with SS contributions & benefits numbers and found that even for a worker who had contributed the maximum SS tax every year in the last 35 years to collect the max SS 2015 benefit of $2,663/month or $31,956/year, he or she still comes out ahead after collecting SS for say 20 years.

Here is the summary:

1. Actual total max SS contributions (1980 to 2015): $310,0764
2. Inflation adjusted max SS contributions (calculated to 2015 value): $437,051
3. Total max SS benefits (20 years assuming 85 years longevity): $639,120
4. Max Spousal benefit 50% for 20 years $319,560
5. Total max SS benefit received $958,680

I don't think it is correct to include employer's contribution. I very much doubt that the worker will receive directly the same amount if their employer does not have to contribute to SS.

So strictly from an individual's pocket POR, even the worker who had contributed the max SS for the last 35 years still will end up receiving more than the original contribution amount.

Of course, one can argue that an individual could have invested the contributed SS amount (SS privatization!) and end up getting even more but in real life, there are winners and there are losers in investments. At the minimum, SS as of today is a guaranteed return.

Note: I used the inflation rates from this site to calculate the '2015 equivalent $' for the inflation adjusted SS contributions.

Historical Inflation Rates: 1914-2015 | US Inflation Calculator

I used the same 2015 SS benefit value for the next 20 years since SS payment is adjusted for COL (inflation).

[M3 Mitch]

Originally Posted by GeoffD

You have to run your particular numbers on your income stream and on a specific house in a specific town to decide whether a state is high tax or not.

I picked a relatively low housing cost area of coastal Massachusetts as my retirement spot for when I intend to retire at age 65 8 years from now. My town has roughly a 1% tax on assessed value. My paid-for retirement house has a $2,500 property tax bill. Massachusetts doesn't tax Social Security. I pay a 5.15% flat state income tax on 401-K/IRA distributions. There is a 6.25% sales tax but the state doesn't tax food and clothing.

If I lived in, say, Winchester, Ma in a desirable inner Boston suburb where I used to own a big house on an acre, I'd be paying $20K in property taxes. That's simply not possible in a Social Security check and what I've managed to put away in IRA/401-K accounts.

I last lived in Portsmouth, NH for a decade. Even with no income tax and no sales tax, the very high housing cost and high property taxes made it impossible for me to consider retiring there. I ran the numbers at age 50 and moved to a place where the numbers worked better.

The "hidden tax" I pay in New England is high energy costs compared to most of the rest of the country. New England has a natural gas pipeline capacity problem. I pay 20 cents per kWh for electricity. My natural gas costs for heating are quite high by national standards.

Geoff, as Einstein said, "it's all relative". My property tax is about half yours, WA has no state income tax, although I do end up with a 7.6% sales tax, again not applied to food. Not a huge difference, but WA is going to be cheaper unless one buys a lot of taxable "stuff" every year.

Power rates are reasonable around here, my bill is based on $12 + 7 cents/kWh.

$20K in property taxes is just nuts.

[Submariner]

Originally Posted by GeoffD

... The "hidden tax" I pay in New England is high energy costs compared to most of the rest of the country. New England has a natural gas pipeline capacity problem. I pay 20 cents per kWh for electricity. My natural gas costs for heating are quite high by national standards.

I pay 21 cents per Kwh, though our electricity comes from Gulf oil.

There is no access to Natural Gas in our town, though a pipeline cuts straight across my land, carrying NG from Canada to some cities in Southern Maine.



I agree that $20k in property taxes is crazy.