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Old 03-17-2012, 10:28 AM   #21
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I'm not understanding the objection some appear to have to withholding taxes from SS benefits. In our case we withhold 10% from SS and also have 10% withheld from our automatic bi-weekly withdrawal from my Vanguard IRA. Our refunds the past two years have been small, so the amounts are right on.

I see no benefit to having zero withholding from SS and having to compute how much additional I should withhold from my IRA distributions to cover the tax owed.

What am I missing?
From my point of view, you're not missing a thing. I like getting a refund so the pain of paying some of our annual bills is less painful. As for those of you with the opinion I'm loaning the government my money sans interest - don't care. And the second school of thought of saving and investing that money is nowhere in my realm of caring (as if there would be any real earnings these days).

I just like the warm and fuzzy feeling of the refund hitting our bank account. It's kind of like having hot cocoa with real whipped cream on a cold and windy day. Or a cold beer on the porch on hot days. It makes me feel good all over.
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Old 03-17-2012, 01:49 PM   #22
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From my point of view, you're not missing a thing. I like getting a refund so the pain of paying some of our annual bills is less painful. As for those of you with the opinion I'm loaning the government my money sans interest - don't care.
It's even easier to have this attitude when savings rates are near zero. What has it cost someone to let the government use an extra (say) $2000 over the course of a year? If you assume they've used the money for an average of an extra 6 months, excess withholding costs you 6 months of interest on $2000 -- which at 0.5% interest on savings would be a whopping five bucks.

But if you think seeing an extra $40 in your paycheck every week would have likely seen it some or all of it spent into the ether, then maybe the "IRS savings plan" isn't so bad after all. It's a lot easier, I think, to spend an extra $40 a week in day to day living stuff than it is to make a conscious decision to spend a $2000 windfall.

I don't advocate overwithholding for the express purpose of getting a big refund, but especially given the pathetic return on cash today, the "free use of money" argument isn't very compelling. I think I'd rather give Uncle Sam a 0% loan than give an 0.5% loan to a bank.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
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Old 03-17-2012, 07:27 PM   #23
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We just completed the W-4V this month to have Federal taxes taken out of DH's SS checks. We sent it by snail mail. We applied for SSA online. There is still not a way to have state tax withheld from SSA. We owe Fed income tax over $2000.00 on tax return. Luckily, there is no penalty, since we paid over what 100% of what our taxes were last year. Our income has jumped all over the place, but next year it should stabilize.
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Old 03-18-2012, 06:03 AM   #24
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I finally got a hold of someone who recently processed her retirement and she said there wasn't any way to select withholding online - she had to print and mail the form. She said she mailed the form (with her social security number prominently displayed), it was processed, and then mailed back to her with the amount of her net pay.

I don't understand why paper would be injected into a paperless process. This just screams for a process improvement. I'll just drive to the nearest social security office when it's my turn to file and do all of the paperwork in person.
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Old 03-18-2012, 07:24 AM   #25
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From my point of view, you're not missing a thing.
In our case, our income is not driven by a constant WD rate. As our expenses expand/contract month by month, we change the amount of our IRA withdrawals along with the FIT paid (we do not pay state nor local income tax on retirement income).

Since our income is driven by expenses (and not the other way around), our FIT changes as does our expenses/withdrawals. An extreme example of that is when I purchased a car in 2008 by using TIRA funds, and computed/withdrew enough in one month to cover estimated FIT due. In December, I ran the updated 2008 TT initial release and it showed additional FIT due for the year, which I had Fidelity withdraw from my account (and forwarded to the Feds).

For most folks who use a constant WD rate (regardless if you do it by year or by month), I understand the idea of having a constant tax. No different than we had during our employment years.

However today, we're fortunate not to have to limit our expenditures to a certain percentage but let our desires drive our income needs. For those that are wondering, yes - our net income today exceeds that of our employment years...
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Old 03-18-2012, 12:31 PM   #26
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<snip>For those that are wondering, yes - our net income today exceeds that of our employment years...
As will mine starting next year.
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Old 03-18-2012, 01:24 PM   #27
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I'll just drive to the nearest social security office when it's my turn to file and do all of the paperwork in person.
I hope that your local social security office is better staffed that what our office is. They prefer that you file online yourself or they will give you an appointment for a teleclaim and someone will call you from another office. They do not do in office claims, unless you are very insistent.
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Old 03-18-2012, 08:31 PM   #28
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There's a whole lot of difference in social security personnel between Megacities and rural communities. The nice folks at the closest SSA office said I could either process my retirement online or in person at their office.

We went to their office last year to ask a few questions. The wait time was two minutes.
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