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Social Security

Why not tie retirement age to Longevity?

When I grandfather retired at 65 about 50 years ago, life expectancy was about 71. Most of the young men (and women) of his generation started working at the age of 18, so 18 to 65 meant that they worked for 47 years. If the average person of his generation died at the age of 71, then that average person worked for 47 years to get 6 years of retirement checks, basically working 7.83 years for each year of checks. I’m 65 and my retirement age is 66 while my life expectancy is 79. I started part time work at the age of 17 and full time work at the age of 20. Ignoring the part time work I will work for 46 years and expect to receive 13 years of retirement checks. I’ll work a little over 3.5 years for each year of retirement checks I receive. If the retirement age moves to 67 for my children as defined in the 1983 legislation, and their life expectancy increases at the same rate, they will live to an average age of 83. If they started work at the age of 21 and worked to 67 they will also work for 46 years, and they should expect to receive benefit checks for 16 years. They will only work for 2.875 years for each year of retirement checks. The system cannot survive as each generation works less time for each year of benefits. The concept of my dad got check for the rest of his life and I want the same does not hold up because “the rest of his life” is constantly increasing, it is not a constant.  (Sep 5, 2012 | post #1)

Social Security

Please check my math, it can’t be correct!

Oh! Before I scare every retiree with my last post, let me clarify the “Take Back” rule. This only applies to earned income before your Normal Retirement Age. The individual above would stop paying the take back at age 66, their normal retirement age! And again, it only applies to earned income from a job, not to your pension or IRA withdraws.  (Apr 12, 2012 | post #2)

Social Security

Please check my math, it can’t be correct!

Let me frame the situation. You had a nice job earning about $75,000 a year, and lost it at the age of 62 in the housing crash. You used up a lot of your IRA money to keep yourself going for a year, then decided to retire early and start collecting Social Security. You will get $20,000 from Social Security and you can convert your IRA’s and Pension into a $18,500 yearly annuity. This is not enough for the next few years so you find a part time position paying you $14,160, the max that Social Security allows you to earn. Using the following number in TurboTax TaxCaster: Age 63, Social Security $20,000, Ira/Pension income $18,500, and $14,160 as earned income. According to TaxCaster your federal Balance Due will be $4,881. Now for the math that I can’t believe! You decide that this is not enough so you ask for more part time hours and raise your earned income up to $15,160. How much of that $1,000 of extra earned income to you get to spend as net income after all taxes? Change your TaxCaster numbers: earned income in now $15,160 and your Social Security benefit in now $19,500. Note that the Social Security administration says that for every $2 you earn over the $14,160 limit, they “take back” $1 of you benefit, so $1,000 of extra earning will reduce your benefit by $500. TaxCaster now says your Balance Due is $5,294. That is a $413 increase in federal tax on your $1,000 of extra earning. OK, here is the rest of the math. So far Social Security has taken back $500 and the IRS is taking $413. That is a total of $913 that the federal government is taking from the $1,000. But, this is earned income so you are paying 4.2% (thanks to the “tax holiday”) for FICA withholdings and 1.45% for Medicare. $913 plus $42 plus $14.50 is a total of $969.50 that 4 different groups within the federal government are taking from your $1,000 in earnings. You get to keep $30.50 for all that extra work! Oh yeah! I live in Maryland so I pay about 5% to the state and another 2.5% to my county. The state of Maryland wants $75 of the $30.50 that the feds let me keep. I have to withdraw $44.50 from my savings to pay the $1,044.50 in taxes, fees and take backs on the $1,000 that I just earned. I’m paying the government 104.45% of my additional earnings! Can this really be true?  (Apr 12, 2012 | post #1)

Social Security

You can pay nearly 80% in federal taxes if you retire early!

OMG ! I just realized that my calculations were wrong. Very few individual will fall into this category, but here is the worst case scenario: You retire early, taking a fairly large amount out of your IRA, plus your social security benefit, and work part time earning over the $14,160 limit. When you earn an additional $1,000, the first thing the Government does is reduce your Social Security Benefit by $500. They also tax you 6.2% for FICA withholding and another 1.45% for Medicare. Now you do your taxes and the additional $1,000 in earnings make $850 of the benefit that is left taxable, so you pay 25% on $1,850 or $462.50. Add the $462.50 that you pay in yearend federal tax to the $500 that you lost in benefits to the $62 you paid in FICA tax to the $14.50 for Medicare, and you reduced your after tax income by $1,039 for each $1,000 that you earn! You are literally paying the Government for the privilege of working!  (Mar 27, 2012 | post #2)

Baltimore, MD

Trayvon Martin - Baltimore, MD

There are two sides to the story, the media is only telling us one of them.  (Mar 27, 2012 | post #6)

Social Security

You can pay nearly 80% in federal taxes if you retire early!

My page on the retirement tax hump, http://www.howtofi xsocialsecurity.co m/hump.htm, talks about retirees paying a 46.25% effective federal tax bracket when they take money out of their IRA. 85% of your benefit becomes taxable when you earn over a certain amount, at the 25% tax bracket, 25% of 185% is 46.25%. Does the annual earnings limit, http://www.ssa.gov /retire2/whilework ing3.htm, that you pay on earned income before you reach your normal retirement age increase the marginal tax rate even higher? It sure sounds like it would. You earn $1000. They keep $500 of your benefit, then tax you 25% on the $500 you do get plus the 85% surcharge of $425, 25% of $925 means you pay $231.25 in federal tax, plus the $500 they didn’t give you in the first place, and what you do get to take home after tax and penalty is $268.25 for each $1,000 of earnings, and this doesn’t count the 6.2% FICA tax you paid on the original $1,000. That sure sounds like a 73.125% effective tax rate, 79.325% if you include the FICA tax you paid.  (Mar 27, 2012 | post #1)

Social Security

Biden calls Republican budget an attack on seniors

Where is the Obama plan for us to compare it against? Oh yeah, theire budget plan was voted down 97 to 3 in the Senate! I won't listen to Biden saying "you are wrong". I will definately listen when he says "you are wrong, and this is the right way to do it". Anything less is just political cheap tactics, totally useless.  (Mar 27, 2012 | post #207)

Social Security

Should same-sex marriage become legal?

If it does become legal, will same sex couples pay the same social security marriage penalty and oposite sex couples? Or will the PC police give same sex couples a special break?  (Mar 27, 2012 | post #8946)

US Politics

Supreme Court weighs historic Obama healthcare law

I remember in my early 30's, 64 now, I had a great job making over $40,000 a year, but no health insurance. I had to make a choice between spending thousands per year after tax to get the insurance or moving to a nicer apartment in a better area of town with better schools for my children. My wife and I chose the insurance, but many of my friends chose the better schools. Can't say if I was right or wrong, but it was my choice. The new law would have made the choice for me. What has happened to American Freedom?  (Mar 27, 2012 | post #206)