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Proper word for how we get Social Security?
Old 12-28-2018, 03:38 AM   #1
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Proper word for how we get Social Security?

Im working on a personal webpage and I want to use the correct terminology when I talk about how we get our Social Security, and LTCGs, tax free, then pay taxes on them later as our other income grows. The way I said it was:

The individual is paying ZERO taxes on about their first $44,300 of gross income because Social Security benefits and Long Term Gains are "tax deferred" income.

But that is not exactly what tax deferred income is! What is the proper way to say that?

PS: Is it against forum rules for me to mention the URL of the page I am creating?
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Old 12-28-2018, 04:22 AM   #2
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Originally Posted by Sandy & Shirley View Post
Im working on a personal webpage and I want to use the correct terminology when I talk about how we get our Social Security, and LTCGs, tax free, then pay taxes on them later as our other income grows. The way I said it was:

The individual is paying ZERO taxes on about their first $44,300 of gross income because Social Security benefits and Long Term Gains are "tax deferred" income.

But that is not exactly what tax deferred income is! What is the proper way to say that?

PS: Is it against forum rules for me to mention the URL of the page I am creating?
Forum policy is to post about any blogs or websites once, here Creative ERs - books, blogs, music and art created by our members
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Old 12-28-2018, 05:18 AM   #3
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LTCG and SS are taxed differently than ordinary income. They each have their own specific rules concerning when they are taxed above 0%.
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Old 12-28-2018, 05:26 AM   #4
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I thought we covered this about 6 months ago, but I'd use "tax dependent" as the taxes due--if any--depend upon several factors.
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Old 12-28-2018, 05:45 AM   #5
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This is identical to the thread you started just a few months ago:

Proper term for Social Security Income

Do we really need to rehash it all over again?
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Old 12-28-2018, 06:01 AM   #6
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Either OP has no idea how to look up old threads or is trying to generate traffic to an alternative website
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Old 12-28-2018, 06:23 AM   #7
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tax-favored?
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Old 12-28-2018, 05:34 PM   #8
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I do not understand this obsession with the concept that social security income is taxed when total income is above a certain amount. It is not different than increasing marginal rates at certain income levels, difference in treatment of capital gains at certain levels, losing deductions at certain levels or losing the ability to contribute to tax deferred accounts at certain levels. That's the tax regime we live under. We can't change it (at least, I can't), so just pay and move on. There are way better objects for your obsession.
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Old 12-28-2018, 05:35 PM   #9
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but that wouldn't generate traffic to his website. I'm wondering if he gets pay per click. Nothing wrong with that
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Old 12-28-2018, 08:02 PM   #10
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Not sure what I said a few months ago but I would refer to them as tax preferenced. SS is only partially taxable, anywhere from 15% to 100% is excluded from income based oon the amount of non-SS income. OTOH, LTCG is fully taxed but at preferential rates... 0% or 15% for most taxpayers.
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Old 12-28-2018, 08:30 PM   #11
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I do not understand this obsession with the concept that social security income is taxed when total income is above a certain amount. It is not different than increasing marginal rates at certain income levels, difference in treatment of capital gains at certain levels, losing deductions at certain levels or losing the ability to contribute to tax deferred accounts at certain levels. That's the tax regime we live under. We can't change it (at least, I can't), so just pay and move on. There are way better objects for your obsession.
If there are things you can do about it, like converting your tIRA before MRDs, or bunching income in some years, it could be helpful. Otherwise I agree.

What I don't understand is the need to create new and confusing terms. I find the OPs posts and charts hard enough to understand as it is, and part of that is because obtuse terminology is used. Just stop.
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Old 12-29-2018, 02:45 AM   #12
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but that wouldn't generate traffic to his website. I'm wondering if he gets pay per click. Nothing wrong with that
I am making absolutely ZERO on my website. My obsession is to make sure that retirees are aware of the 40.7% and 49.95% marginal tax rates that they can face during retirement.
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Old 12-29-2018, 03:00 AM   #13
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I do not understand this obsession with the concept that social security income is taxed when total income is above a certain amount. It is not different than increasing marginal rates at certain income levels, difference in treatment of capital gains at certain levels, losing deductions at certain levels or losing the ability to contribute to tax deferred accounts at certain levels. That's the tax regime we live under. We can't change it (at least, I can't), so just pay and move on. There are way better objects for your obsession.
I agree, but at the same time for tax planning it is important that retirees understand the tax implications of certain moves. For example, the marginal tax rate on Roth conversions that end up taxed at theordinary rate and push long-term capital gains from a 0% rate to a 15% rate. Similarly, certain moves could result in a high marginal tax for Roth conversions if it causes more social security income to become taxable as well.
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Old 12-29-2018, 06:46 AM   #14
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I agree, but at the same time for tax planning it is important that retirees understand the tax implications of certain moves. For example, the marginal tax rate on Roth conversions that end up taxed at theordinary rate and push long-term capital gains from a 0% rate to a 15% rate. Similarly, certain moves could result in a high marginal tax for Roth conversions if it causes more social security income to become taxable as well.
True enough.

I guess my view is colored by the fact that I can't imagine retiring with an income less than the amount which implicates taxation of social security.

It is my understanding that the average SS benefit is about $17.5k. The formula for the SS taxation test is: non-taxable interest (like muni bonds) + other taxable income + 1/2 SS = combined income. If combined income is greater than $32k, then 50% of SS is taxed. If greater than $44k, then 85% of SS is taxed. So a married couple with average SS benefits can make only $49.5k in real total income (i.e. - adding back in the 1/2 SS), or only $14.5k of non-SS income, before SS begins to be taxed.

My plans have always assumed full taxation of social security. The fact that 15% of it actually will be tax-free is merely lagniappe.
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Old 12-29-2018, 06:54 AM   #15
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True enough.

I guess my view is colored by the fact that I can't imagine retiring with an income less than the amount which implicates taxation of social security.

It is my understanding that the average SS benefit is about $17.5k. The formula for the SS taxation test is: non-taxable interest (like muni bonds) + other taxable income + 1/2 SS = combined income. If combined income is greater than $32k, then 50% of SS is taxed. If greater than $44k, then 85% of SS is taxed. So a married couple with average SS benefits can make only $49.5k in real total income (i.e. - adding back in the 1/2 SS), or only $14.5k of non-SS income, before SS begins to be taxed.

My plans have always assumed full taxation of social security. The fact that 15% of it actually will be tax-free is merely lagniappe.
"A lagniappe (/ˈlnjp/ LAN-yap, /lnˈjp/ lan-YAP) is "a small gift given to a customer by a merchant at the time of a purchase" (such as a 13th doughnut on purchase of a dozen), or more broadly, "something given or obtained gratuitously or by way of good measure."

Sorry, I was not familiar with that word.
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Old 12-29-2018, 07:21 AM   #16
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"A lagniappe (/ˈlnjp/ LAN-yap, /lnˈjp/ lan-YAP) is "a small gift given to a customer by a merchant at the time of a purchase" (such as a 13th doughnut on purchase of a dozen), or more broadly, "something given or obtained gratuitously or by way of good measure."

Sorry, I was not familiar with that word.
Thank you for the explanation; I am always learning.
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Old 12-29-2018, 07:42 AM   #17
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...........................It is my understanding that the average SS benefit is about $17.5k. The formula for the SS taxation test is: non-taxable interest (like muni bonds) + other taxable income + 1/2 SS = combined income. If combined income is greater than $32k, then 50% of SS is taxed. ............................. So a married couple with average SS benefits can make only ........................$14.5k of non-SS income, before SS begins to be taxed.

................................................
how much of SS is taxed if you make $14.5K + $1 of non-SS income?
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Old 12-29-2018, 07:47 AM   #18
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And that's the point, that extra $1 or $100 or $1,000 of Roth conversions can cost you big time if you are not aware not how it works.
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Old 12-29-2018, 07:56 AM   #19
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And that's the point, that extra $1 or $100 or $1,000 of Roth conversions can cost you big time if you are not aware not how it works.
That's only really true for the ACA subsidy cliff, right?

$100 extra in the SS calcs could cost you $41 or $50. A high marginal rate, but not a big dollar amount. You want to avoid it, but the price for slipping over isn't all that bad.

$100 extra in the 0% LTCG calcs could cost you $27. Same thing.

$100 extra for ACA subsidy calcs costs you whatever your subsidy at 400% FPL. In my case $100 extra would cost me about $8000. A huge rate and a huge dollar amount. You want to avoid at all costs.
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Old 12-29-2018, 08:01 AM   #20
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No, if that extra $1 or$100 or $1,000 changes your taxable SS to go from $0 to 50% of SS or from 50% to 85% then the incremental tax cost could easily exceed the amount of the incremental income. Similar mechanics to the ACA cliff.

So let's say you have $16k of SS... the wrong move could add $8k or $13.6k to your taxable income, so at 10 or 12% would be $800 to $1,600 of additional tax.
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