|
|
SS Taxation (from the tax cut bill)
12-04-2017, 08:42 PM
|
#1
|
gone traveling
Join Date: Aug 2006
Posts: 994
|
SS Taxation (from the tax cut bill)
Mod note - these posts were moved from the tax bill thread to begin a new and separate discussion here.
.
I wonder if either the House or the Senate bothered to address the decades old mess they made when they linked the tax on Social Security to an income that was not indexed for inflation, never increases due to inflation and is now a burden on low income seniors.
Speaking of inflation... both the House and Senate versions use Chained CPI for items that are indexed for inflation which means future inflation increases will be lower.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
12-04-2017, 09:26 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
|
Quote:
Originally Posted by Helena
.
I wonder if either the House or the Senate bothered to address the decades old mess they made when they linked the tax on Social Security to an income that was not indexed for inflation, never increases due to inflation and is now a burden on low income seniors.
Speaking of inflation... both the House and Senate versions use Chained CPI for items that are indexed for inflation which means future inflation increases will be lower.
|
I think that answered your question. They would like slower inflation adjustments and probably very happy with other thresholds not being indexed.
__________________
Retired since summer 1999.
|
|
|
12-04-2017, 09:38 PM
|
#3
|
Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,593
|
Quote:
Originally Posted by audreyh1
I think that answered your question. They would like slower inflation adjustments and probably very happy with other thresholds not being indexed.
|
I think us seniors that are paying ordinary income tax on 85% of a benefit threshold that was not indexed for inflation is the issue. It sucks after paying into it heavily for 4+ decades. None of the seniors I know that pay the tax are happy.
__________________
*********Go Astros!*********
|
|
|
12-04-2017, 09:59 PM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
|
Quote:
Originally Posted by aja8888
I think us seniors that are paying ordinary income tax on 85% of a benefit threshold that was not indexed for inflation is the issue. It sucks after paying into it heavily for 4+ decades. None of the seniors I know that pay the tax are happy.
|
Definitely many folks have moved past the threshold due to inflation.
I just think the “trend” right now is against correcting for things like that.
__________________
Retired since summer 1999.
|
|
|
12-04-2017, 10:05 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
|
If you had made contributons of after-tax money to a contributory pension plan for 40 years and started receiving benefits a large percentage of those benefits would be taxable... same difference... just like if you made non-deductible contributions into an IRA and started withdrawals a large portion of those withdrawals would be taxable.... same thing.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
12-06-2017, 04:37 AM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,976
|
Quote:
Originally Posted by pb4uski
If you had made contributons of after-tax money to a contributory pension plan for 40 years and started receiving benefits a large percentage of those benefits would be taxable... same difference... just like if you made non-deductible contributions into an IRA and started withdrawals a large portion of those withdrawals would be taxable.... same thing.
|
Not exactly. SS was originally tax free. Then 35 years ago a nonindexed income number was picked for taxation. In effect this has gradually eroded the net benefit. I get your point but its a little apples and oranges IMHO. However it is a good indicator of what can be done to address the ss issue.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
|
|
|
12-06-2017, 06:36 AM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
|
While SS was originally tax free the point is that it should not have been comparing SS to similar contributory retirement instruments where contributions are after-tax money where one is taxed on growth but not on return of contributions... and 85% is about right though I concede that we got to a sensible result in an odd way.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
12-07-2017, 07:09 AM
|
#8
|
gone traveling
Join Date: Apr 2011
Posts: 3,375
|
Quote:
Originally Posted by Helena
.
I wonder if either the House or the Senate bothered to address the decades old mess they made when they linked the tax on Social Security to an income that was not indexed for inflation, never increases due to inflation and is now a burden on low income seniors.
|
I don't understand this/what it is referring to. Please explain. Thanks.
|
|
|
12-07-2017, 07:13 AM
|
#9
|
gone traveling
Join Date: Apr 2011
Posts: 3,375
|
Quote:
Originally Posted by pb4uski
If you had made contributons of after-tax money to a contributory pension plan for 40 years and started receiving benefits a large percentage of those benefits would be taxable... same difference... just like if you made non-deductible contributions into an IRA and started withdrawals a large portion of those withdrawals would be taxable.... same thing.
|
I understand it, all the benefit payments for both are fully income taxable. Only thing that isn't is the return of the after-tax contributions which are not really a benefit.
|
|
|
12-07-2017, 10:04 AM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
|
Not sure what your point is but I guess one could argue that any return of contributions is not a benefit but a return of your own money whether the contributions were tax deductible or not.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
12-07-2017, 10:10 AM
|
#11
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,331
|
Quote:
Originally Posted by Helena
[I][B]
I wonder if either the House or the Senate bothered to address the decades old mess they made when they linked the tax on Social Security to an income that was not indexed for inflation, never increases due to inflation and is now a burden on low income seniors.
|
You're assuming that wasn't the plan from the beginning. I don't know either way but it's possible.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
|
|
|
12-07-2017, 10:48 AM
|
#12
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
|
Quote:
Originally Posted by gerntz
I don't understand this/what it is referring to. Please explain. Thanks.
|
It's badly worded.
The $32,000, $25,000, $12,000, and $9,000 on this worksheet are not indexed for inflation https://taxmap.irs.gov/taxmap/pubs/p...link1000263043
The result is that for some people with SS benefits growing with inflation, and other income that's growing with inflation, the fraction of their SS benefit which is taxable grows (where you might think that fraction should be constant).
Other people have already hit the cap where 85% of their benefits are taxable, so this indexing issue doesn't impact them.
|
|
|
12-07-2017, 12:31 PM
|
#13
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,134
|
Quote:
Originally Posted by Independent
The result is that for some people with SS benefits growing with inflation, and other income that's growing with inflation, the fraction of their SS benefit which is taxable grows (where you might think that fraction should be constant).
|
Sounds like part of a plan to fix the SS funding problem.
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
|
|
|
12-07-2017, 06:27 PM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
|
Quote:
Originally Posted by Chuckanut
Sounds like part of a plan to fix the SS funding problem.
|
You are substantially correct. The taxes raised by the first 50% are credited to the SS Trust Fund. So, from a SS funding perspective, this is exactly like a benefit cut.
However, the taxes raised by the additional 35% go to the Medicare Trust Fund.
Nice history here: https://www.ssa.gov/history/taxationofbenefits.html
|
|
|
12-07-2017, 06:52 PM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,976
|
We can debate the details, but in any event we're not going to get what was promised back in the day. Taking it at 62 and dealing with it as we go
__________________
Took SS at 62 and hope I live long enough to regret the decision.
|
|
|
12-07-2017, 07:48 PM
|
#16
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
|
Disgree.... putting aside any potential haircut in 2034 you are going to get what was promised back in the day. However, more of what you get might be subject to tax.
Think of it as a success tax.... if you were less successful they you would not be taxed as much.
In fact, if you didn't have all those extra assets and savings and income then most likely a lot less of your SS woud be taxable... if it makes you feel better give those extra assets away and you'll get the deal you were expecting and be happier.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
12-07-2017, 09:13 PM
|
#17
|
gone traveling
Join Date: Apr 2011
Posts: 3,375
|
Quote:
Originally Posted by Independent
It's badly worded.
The $32,000, $25,000, $12,000, and $9,000 on this worksheet are not indexed for inflation https://taxmap.irs.gov/taxmap/pubs/p...link1000263043
The result is that for some people with SS benefits growing with inflation, and other income that's growing with inflation, the fraction of their SS benefit which is taxable grows (where you might think that fraction should be constant).
Other people have already hit the cap where 85% of their benefits are taxable, so this indexing issue doesn't impact them.
|
Dang!! Thanks. Still complicated.
|
|
|
12-08-2017, 05:13 AM
|
#18
|
Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,976
|
Quote:
Originally Posted by pb4uski
Disgree.... putting aside any potential haircut in 2034 you are going to get what was promised back in the day. However, more of what you get might be subject to tax.
Think of it as a success tax.... if you were less successful they you would not be taxed as much.
In fact, if you didn't have all those extra assets and savings and income then most likely a lot less of your SS woud be taxable... if it makes you feel better give those extra assets away and you'll get the deal you were expecting and be happier.
|
Taking away a dollar in benefits or adding a dollar of taxes is the same to me.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
|
|
|
12-08-2017, 07:31 AM
|
#19
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
|
Quote:
Originally Posted by foxfirev5
Taking away a dollar in benefits or adding a dollar of taxes is the same to me.
|
I'm not sure what tax treatment you were expecting "back in the day".
The current tax rules were passed 24 years ago.
When I was doing retirement planning, I figured that 85% of my SS benefit would be included in AGI, because I figured inflation would erode the brackets in the formula. Seems like a reasonable assumption.
|
|
|
12-08-2017, 07:38 AM
|
#20
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,201
|
Quote:
Originally Posted by foxfirev5
Taking away a dollar in benefits or adding a dollar of taxes is the same to me.
|
The changes that you refer to that tax social security benefits were put in place in 1983 (50%) and 1993 (increased from 50% to 85%).... I would have thought that you would have had sufficient time to internalize the change by now without lamenting that we are not getting what we were promised "back in the day" when you are getting what you were promised but rather than being tax-free (which it really shouldn't have been to begin with) it is now taxed like other similar contributory retirement plans.
WADR, it seems like a pretty petty indignation to me.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|