Social Security Statements Now Available

[samclem]

From my point of view, this "annuity" was well worth the purchase price, and I'm now really appreciating all those contributions my former employers made.

SS serves an important function and it's nice to have that gauranteed income that can be used to keep body and soul together come what may. But remember that those SS taxes paid by your employer were really and truly compensation that would have gone to you if it hadn't gone to the government. When employers decide to create a position or hire someone to fill one, they do the math on all the costs--insurance, SS taxes, pension/401K matching,etc . That's what the position is worth to them. In the absence of SS taxes and in the presence of a free labor market, employees could be compensated in cash right up to that point. Viewed in that way, most of us would be far ahead if we had our own SS contributions and those of our employers to invest as we choose.

That's not to say SS should be abolished. It provides some important social functions and at the very least probably allows most of us to take some more investment risks (= higher expected returns) than we would take in the absence of SS. But we should recognize it for what it is (a dependable base of income for which we pay a premium). And is not (a program that increases our net worth).

 

[MichaelB]

Samclem, if we could have back our life or car insurance premiums we would also have a substantial sum of money. Your assertion has a survivors bias and a success bias. The widows and orphans would not be far ahead, nor would those that left the work force involuntarily, or earned the least over their working lives.

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.

 

[skyvue]

Wow... yeah that is a lot less of a difference than I assumed! Hardly a factor in deciding to work longer seeing that 12 extra years is only worth about an extra 16% in benefits.

Also as I mentioned before, anyone who has the option to FIRE at 50 is not all that concerned about SS anyways.

In addition, I belive you can make it almost no factor by earning just a little income ($4,520/yr) in part-time seasonal job of some sort so you don't have the "zero years".

 

[Major Tom]

But we should recognize it for what it is (a dependable base of income for which we pay a premium).

That's what I like about it - that, and the fact that as someone who stopped working at age 45, it looks like I will get a better deal out of SS than if I had worked another 15-20 years. So although I know that analyzing SS in terms of what you get out versus what you put in misses the point, in my case, I most likely will do well in those terms.

For that reason, I'm glad that the government "forced" me to purchase an "annuity"

 

[samclem]

Samclem, if we could have back our life or car insurance premiums we would also have a substantial sum of money. Your assertion has a survivors bias and a success bias. The widows and orphans would not be far ahead, nor would those that left the work force involuntarily, or earned the least over their working lives.

Yes, a minority of folks are better off. That's why I used terms like "most of us" etc. As presently structured SS is insurance and has other purposes (as I made clear). Anyone who earned an average wage and retires after 40 years of paying SS taxes certainly didn't and won't receive any personal benefit that was "well worth the price," which is why I responded to Major Tom.

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.

It depends entirely on the labor market. Employers always pay as little as possible, employees always demand as much as possible. But the money was there to be paid to someone, the employee's value-added made that possible.

 

[oldphd]

I think I found the answer.. It looks like they average out your top 35 years of ss taxable income... so since I started contributing the max in SS at age 25, I guess that means that if I am still working at 60 (and am fortunate enough to still be making the max income)... then taxes I pay towards SS from work beyond age 60 won't benefit me at all.

Also... I guess that means that if I planned to retire at 50, I can expect my SS checks to be about 25/35 or 60% what they would be if I worked another 10 years until age 60...

Obviously if FIRE is possible at 50... the last thing on my mind will be collecting a few hundred more in SS. Certainly not reason enough to keep me working another decade

Try looking at this:

Social Security Publications

Look at step 5, and you'll see how the benefit is a higher % for the lower earnings, and smaller % for the higher earnings. As has been mentioned, some of those extra years can have a modest impact on your benefit.

 

[MichaelB]

Locked out for a second day. Two phone calls to the SSA, about a 3/4 hour in total, were unable to resolve but we did agree on my name and SS#. My options are 1) continue attempting to login ever 24 hours, 2) visit the local office where they will do something, 3) wait 'till I'm 60 when they will send a statement in the mail, or 4) send a written request for a mailed statement. I'll go with 1 and 4.

 

[REWahoo]

Locked out for a second day. Two phone calls to the SSA, about a 3/4 hour in total, were unable to resolve but we did agree on my name and SS#. My options are 1) continue attempting to login ever 24 hours, 2) visit the local office where they will do something, 3) wait 'till I'm 60 when they will send a statement in the mail, or 4) send a written request for a mailed statement. I'll go with 1 and 4.

If you look anything like your avatar, don't opt for #2. That 'something' they do might involve the cops...

 

[MichaelB]

If you look anything like your avatar, don't opt for #2. That 'something' they do might involve the cops...

Unfashionable sunglasses?

 

[REWahoo]

Unfashionable sunglasses?

You're wearing sunglasses?

 

[Independent]

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.

I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.

 

[scrabbler1]

I never noticed before, that health insurance and such reduces the amount of your income subject to SS and medicare. Has it always been that way, I wonder?

This is due to Section 125, the "cafeteria plan" provision of the IRS code.

Cafeteria plan - Wikipedia, the free encyclopedia

I know it is only Wikipedia, but this has a quick description of it. It was introduced in 1978. Back in my working days, my company qualified for it circa 1990. From the above link:

"Employees' pretax contributions are not subject to federal, state, or social security taxes."

I would dispute the "state" portion of the above sentence because it is up to the state as to whether it will exempt pretax health insurance premiums from its own definition of income. (New Jersey did not, for example.)

 

[eridanus]

This is due to Section 125, the "cafeteria plan" provision of the IRS code.

Cafeteria plan - Wikipedia, the free encyclopedia

I know it is only Wikipedia, but this has a quick description of it. It was introduced in 1978. Back in my working days, my company qualified for it circa 1990. From the above link:

"Employees' pretax contributions are not subject to federal, state, or social security taxes."

Sadly, this is not the case with self-employed (1099) income. It needs to pass through your own corporation first.

I'm wondering why my online SS statement has numbers about $2500 less than what my 1040 says?

 

[jdw_fire]

Originally Posted by MichaelB

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.

I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.

and i gotta agree with MB. do you really think that when companies did away with DB plans, replacing them with 401k's, that they then put all the money they had been paying into those DB plans right into their employees 401k's? i think not and so i doubt that if they no longer had to pay FICA that they would just pass what they were paying to FICA to their employees.

 

[Htown Harry]

This was the first part of one of my questions:

You may have opened a mortgage loan in or around April 2004. Please select the lender to whom you currently make your mortgage payments...

Clearly the SSA doesn't understand the benefits of being a serial re-financer.

Fortunately, all of the choices were wrong for both my 2004 and current mortgages, so "none of the above" was my correct answer.

By the way, my social security card has just a first and last name (my legal name is longer). I used the short one and left the middle name box untouched. I was accepted for an account the first time through, with no problems at all.

 

[ejman]

It's now possible to get an online version of the social security statement we used to get in the mail every year.

https://www.socialsecurity.gov/

They've added a section where you can see the total social security and medicare payments you and your employer made. Since a good half of my working life was at the much lower contribution rates, it looks like I'm getting a good return on my SS money unless the government decides I'm too "lucky" and cuts my benefits.

Thank you for the link. It's interesting to see that the estimate for my benefit at 62 at the end of this year is only 1% higher than the paper estimate I received in Mid 2010. I ER'd 10 years ago so I have 10 years of zero's as income. My wife is already collecting SS and her payment went up over 3% this year. I guess SS uses a different index before payments are started (Wage index) and another index (CPI) after SS payments start. Does this discrepancy of utilizing different indexes continue if payment is delayed to age 70?

 

[skyvue]

I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.

I agree. This reminds me of the ridiculous argument that we need to cut taxes on small business so they "can hire more employees". In reality, cutting taxes on small business means more profit for the small business owner! As a couple of my friends said, "we hire additional people when we have to". Has nothing to do with their tax rate.

 

[skyvue]

Sadly, this is not the case with self-employed (1099) income. It needs to pass through your own corporation first.

I'm wondering why my online SS statement has numbers about $2500 less than what my 1040 says?

Your statement lists your Taxed Social Security Earnings and your Taxed Medicare Earnings. This is not your total income as some income is not eligible for these taxes.

 

[eytonxav]

Thank you for the link. It's interesting to see that the estimate for my benefit at 62 at the end of this year is only 1% higher than the paper estimate I received in Mid 2010. I ER'd 10 years ago so I have 10 years of zero's as income. My wife is already collecting SS and her payment went up over 3% this year. I guess SS uses a different index before payments are started (Wage index) and another index (CPI) after SS payments start. Does this discrepancy of utilizing different indexes continue if payment is delayed to age 70?

I am not 100% sure, but I believe (hope) the wage indexing stops once you are first eligible to start collecting at 62, at which point the cpi indexing takes over. Where is jdw_fire, I'll bet he can answer this with certainty.

 

[MichaelB]

I am not 100% sure, but I believe (hope) the wage indexing stops once you are first eligible to start collecting at 62, at which point the cpi indexing takes over. Where is jdw_fire, I'll bet he can answer this with certainty.

I'm not jdw but can confirm your understanding is correct.

Edit for clarification: you reach eligibility age of 62, your PIA is calculated, and from then on all increases are CPI only.

 

[scrabbler1]

Has anyone here tried to use the data from the newly created online SS statements as input to the SS Benefit Calculator to see if the projected benefits match? It was an unintentional nudge from one of you which prompted me to make another attempt to get the SS Benefit Calculator I downloaded last year to work better. And it did, matching my own spreadsheet's results (within rounding) after I replaced the outdated Wage Indexing Factors with the current ones from the Calculator.

 

[eytonxav]

I'm not jdw but can confirm your understanding is correct.

Edit for clarification: you reach eligibility age of 62, your PIA is calculated, and from then on all increases are CPI only.

Thanks for confirming. To me its an important point, as I wouldn't be surprised to see further wage erosion over the next few years.

 

[MichaelB]

Thanks for confirming. To me its an important point, as I wouldn't be surprised to see further wage erosion over the next few years.

Right. The BLS report released a few minutes ago shows median hourly wage rising at an annual rate of only 1.8%, below inflation. It's been like that since the beginning of the recovery. Wage erosion is not something that might happen, it is happening.

 

[ejman]

Right. The BLS report released a few minutes ago shows median hourly wage rising at an annual rate of only 1.8%, below inflation. It's been like that since the beginning of the recovery. Wage erosion is not somethinig that might happen, it is happening.

Yes, that's why I wondered which index was used. Thank you all for answering that question.

 

[ziggy29]

Why would the SSA know who I took house and car loans with

Well, they do already have your SSN....