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Old 02-05-2011, 06:17 AM   #41
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well, unless there is some miracle and I get phase two of my career (ha ha, what career, the last 15 years my "career" resembled a ski slope), I'm counting on every penny, so yes I am worried!
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Old 02-05-2011, 06:22 AM   #42
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Means Testing will not be a determinant of qualifying for SS. I believe everyone will get it. After all a promise made is a promise kept.


Here is what it will likely mean.

Means Testing = Progressive Tax Rate

The only question in my mind is how it will be applied.


It will be a real kick in the butt if the government approach is:

401k or pension = wealthy


Perhaps... All the more reason to FIRE early and engineer one's outcome. If one is of reasonably moderate means.... why continue to work and saving with the likely outcome being ... pay more taxes?
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Old 02-05-2011, 06:57 AM   #43
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...Perhaps... All the more reason to FIRE early and engineer one's outcome. If one is of reasonably moderate means.... why continue to work and saving with the likely outcome being ... pay more taxes?
BINGO!

This is exactly the situation I found myself in at age 48. Once I got the ol' calculator out and fired up TurboTax, I looked at my w*rking gross income and current tax bracket. I then modelled my projected FIREd income in a non-w*rking lower tax bracket.

It wasn't rocket science! All I had to do is cut costs a little and formulate a stricter budget. Very little pain involved...
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Old 02-05-2011, 07:20 AM   #44
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I get taxed on 85% of my ss income right now. How much more can they take? I thought taxing my ss income was a tax on a tax. anyone who saves and tries to have a secure retirement is pretty much out in the cold as far as ss or medicare are concerned. I have been thinking of retiring to some other country but can't get the wife to go along. if you want to be happy in retirement, own nothing, have no income, and the state will take care of you, just think of the headaches you will save. spend now worry later.
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Old 02-05-2011, 07:49 AM   #45
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I get taxed on 85% of my ss income right now. How much more can they take? I thought taxing my ss income was a tax on a tax. anyone who saves and tries to have a secure retirement is pretty much out in the cold as far as ss or medicare are concerned. I have been thinking of retiring to some other country but can't get the wife to go along. if you want to be happy in retirement, own nothing, have no income, and the state will take care of you, just think of the headaches you will save. spend now worry later.
A little overblown, don't you think? If you and your wife were getting maximum social security at the normal retirement age, you would be getting $56,784 per year total. Given nothing but the standard deduction and personal exemptions, you would pay $3539 in federal income tax, or about 6.2% of your income (you would be in the 15% marginal bracket). If 100% of your social security income were taxed instead of just 85% of it, your taxes would rise by $1278, and you would be paying about 8.5% of your income in taxes. Unpleasant, yes, but hardly catastrophic. And the effect on those making less than the maximum social security is even lower.
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Old 02-05-2011, 08:01 AM   #46
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As to the OP's question? No I'm not. I'm sure that DW/me will be paying taxes on 100% of our SS (currently would be at 85%, at our income level), that extra 15% on just a portion of our retirement income would not be enough to worry about (as Gumby has shown).

I don't want to derail the initial question, but I read an interesting article yesterday, and it applies to all those that don't plan for SS due to their age, which seems to be a lot on this thread.

Why Social Security taxes are a good deal Jeff Reeves - MarketWatch
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Old 02-05-2011, 08:20 AM   #47
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... I thought taxing my ss income was a tax on a tax. ...
No, no, no...... Let's get it right! SS is the new welfare (kinda like 50 is the new 40). You rich people should be ashamed of yourself trying to game the welfare system and all! Does your greed have no bounds?
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Old 02-05-2011, 08:28 AM   #48
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"the new welfare" ? I didn't know you had to pay for welfare. I do feel bad about expecting a return on the money I paid in all those years, I guess I'm old fashioned. to think that you would expect something from your investment, who knew I was such a dummy? but then like I said if I never worked I could sign up for ssi(supplemental security income) and medicaid and never have had to pay a penny and not be taxed on it later.
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Old 02-05-2011, 08:30 AM   #49
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As to the OP's question? No I'm not. I'm sure that DW/me will be paying taxes on 100% of our SS (currently would be at 85%, at our income level), that extra 15% on just a portion of our retirement income would not be enough to worry about (as Gumby has shown).

I don't want to derail the initial question, but I read an interesting article yesterday, and it applies to all those that don't plan for SS due to their age, which seems to be a lot on this thread.

Why Social Security taxes are a good deal Jeff Reeves - MarketWatch
Thanks for the link to the article.
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Old 02-05-2011, 08:43 AM   #50
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I get taxed on 85% of my ss income right now. How much more can they take? I thought taxing my ss income was a tax on a tax. anyone who saves and tries to have a secure retirement is pretty much out in the cold as far as ss or medicare are concerned. I have been thinking of retiring to some other country but can't get the wife to go along. if you want to be happy in retirement, own nothing, have no income, and the state will take care of you, just think of the headaches you will save. spend now worry later.
You have lots of company in that thinking and some have even taken it a step further.

Dying With Debt
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Old 02-05-2011, 09:16 AM   #51
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Not concerned. I think SS and Medicare should be means tested.

My SS contribution is quite low - only 14 years IIRC, just past the minimum to qualify, and half of those were when I was studying and earning very little, so I am not giving up much. Still, I don't understand why I should be provided subsidized health care when I can afford to pay. All I want is access to coverage (which I am currently denied).
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Old 02-05-2011, 09:41 AM   #52
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Not concerned. I think SS and Medicare should be means tested.
Of course you do, you've made it abundantly clear that just love paying taxes, and wish everyone else felt the same; More is better.

Some of us disagree.
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Old 02-05-2011, 09:47 AM   #53
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in regard to the article dying with debt. the banks and fed aren't doing anyone any favors, interest rates staying at zero, banks raising all their fees, no interest on savings, cd's, checking. why should the elderly worry about paying back banks or credit cards who are bilking them for all they can get?
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Old 02-05-2011, 10:02 AM   #54
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It seems that folks like us that are / have been building up a nest egg would end up getting screwed by all this. If there is a high balance in an IRA, thus having a sizable RMD, or income generating or non-retirement liquid asset, or a side pension, etc., then the entitled SS benefit may be means-tested completely away!

To not get screwed, it may require that folks don't save up too much, so that they can keep their entire benefit!
It does seem that way. Remember what Willie Sutton supposedly said when asked why he robs banks, "because that's where the money is." The gov will not get much $ by taxing the poor.

But that's a very short-sighted attitude. If people stop working hard and saving and investing, the whole system collapses. It sure seems like we're headed in that direction.

To answer your subject heading, I'm not counting on any SS at all, even though I've paid in enough over 39 years to earn close to the maximum possible benefit. Not-so-easy come, easy go. To minimize the tax burden that's bound to increase, I'm moving a large portion of my IRA to a Roth and paying the tax on it now. We'll just have to wait and see if that does any good.
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Old 02-05-2011, 10:08 AM   #55
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in regard to the article dying with debt. the banks and fed aren't doing anyone any favors, interest rates staying at zero, banks raising all their fees, no interest on savings, cd's, checking. why should the elderly worry about paying back banks or credit cards who are bilking them for all they can get?
On the one hand I agree but on the other the banks just pass that cost of business on to the rest of us. The responsible among us always end up paying in the end.
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Old 02-05-2011, 10:20 AM   #56
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Perhaps... All the more reason to FIRE early and engineer one's outcome. If one is of reasonably moderate means.... why continue to work and saving with the likely outcome being ... pay more taxes?
Same thing I tried to say in my post, but your post is much clearer, thanks. And this thought has definitely been a factor in my decision to retire early...
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Old 02-05-2011, 10:30 AM   #57
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Of course you do, you've made it abundantly clear that just love paying taxes, and wish everyone else felt the same; More is better.

Some of us disagree.
Excuse me?
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you've made it abundantly clear that just love paying taxes
No, this is not true

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and wish everyone else felt the same
This also is not true

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More is better.
I have no idea what you mean by this.

Everything else I agree with.
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Old 02-05-2011, 10:42 AM   #58
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A little overblown, don't you think? If you and your wife were getting maximum social security at the normal retirement age, you would be getting $56,784 per year total. Given nothing but the standard deduction and personal exemptions, you would pay $3539 in federal income tax, or about 6.2% of your income (you would be in the 15% marginal bracket). If 100% of your social security income were taxed instead of just 85% of it, your taxes would rise by $1278, and you would be paying about 8.5% of your income in taxes. Unpleasant, yes, but hardly catastrophic. And the effect on those making less than the maximum social security is even lower.
I realize that my earlier example was incomplete and did not fully address the point I was trying to make.

Let's assume that you and your wife not only get maximum social security (as above), but that you were also one of society's "ants" who saved up $750,000, which generates an additional $30,000 in ordinary income every year. Now, your gross income is $86,784. Your taxes are $8040, or about 9.3% of total income (you are still in the 15% marginal bracket). If 100% of social security were taxed versus just 85%, you would again pay just $1278 more in tax.

Now, suppose the rule were that anyone who has income outside of social security gets 100% of benefits taxed. Can you honestly say that you would prefer to give up the $750,000 nest egg and forego the $30,000 annual income ($25,500 net of tax) just so you could avoid a maximum $1278 tax increase? I wouldn't.
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Old 02-05-2011, 11:17 AM   #59
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No. It may cause SS to be taxed at 100% but I can't see it being removed altogether based on either income or net worth - that would be political suicide imo.
I agree with your assessment.
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Old 02-05-2011, 11:32 AM   #60
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I realize that my earlier example was incomplete and did not fully address the point I was trying to make.

Let's assume that you and your wife not only get maximum social security (as above), but that you were also one of society's "ants" who saved up $750,000, which generates an additional $30,000 in ordinary income every year. Now, your gross income is $86,784. Your taxes are $8040, or about 9.3% of total income (you are still in the 15% marginal bracket). If 100% of social security were taxed versus just 85%, you would again pay just $1278 more in tax.

Now, suppose the rule were that anyone who has income outside of social security gets 100% of benefits taxed. Can you honestly say that you would prefer to give up the $750,000 nest egg and forego the $30,000 annual income ($25,500 net of tax) just so you could avoid a maximum $1278 tax increase? I wouldn't.
What if you saved up 750,000 and have it invested in a roth or municpal bonds and thus have an additional $25,000 in income that the government doesn't tax? I thought the means testing idea in this thread was they will look at the value of your portfolio, your house, your wife's wedding ring, your cars, boats, porn collection, etc. and add it all up to get an idea of how much they can rip you off on SS?

It will actually be kind of nice when/if they do start means testing, because there is this cute little house down the street owned by an older lady living off SS that I would like to buy but she doesn't want to sell. If they means test her, then she will have to sell it because it is worth $500,000 and she can't afford to have her SS reduced because of her assets. I hope they enact this soon.
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