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Old 06-11-2015, 05:57 PM   #21
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It surprises me how many people don't know that they are not (significantly) boosting their SS benefits by working after 55.

At that point one is just paying into the system and loosing last healthy years in an office. Statistically those healthy years end in high 60s.
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Old 06-11-2015, 06:42 PM   #22
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For those with a significant taxable pension (about $34K and up) you will already be subject to a reduction in SS since 85% of it will be taxed at your marginal rate (15% & 25% are common). So if your SS is $20K you will "lose" $3K - $5K in addition to the usual deduction for MC (at least $104 a month; or $1,248 a year). This to my way of thinking is be a significant "reduction" in benefits.
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Old 06-11-2015, 07:26 PM   #23
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For those with a significant taxable pension (about $34K and up) you will already be subject to a reduction in SS since 85% of it will be taxed at your marginal rate (15% & 25% are common). So if your SS is $20K you will "lose" $3K - $5K in addition to the usual deduction for MC (at least $104 a month; or $1,248 a year). This to my way of thinking is be a significant "reduction" in benefits.
Good point. Down the road, I wonder if Roth gains will be treated in a similar way. They won't be taxed directly (they promised they wouldn't!), but the withdrawn Roth gains will be included in the formula to increase the amount of SS subject to taxes, lower the tax brackets and thresholds for CG and dividend taxation, etc. So, they won't be taxed (technically), but they'll increase the taxes you pay on other income.
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Old 06-11-2015, 08:14 PM   #24
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Good point. Down the road, I wonder if Roth gains will be treated in a similar way. They won't be taxed directly (they promised they wouldn't!), but the withdrawn Roth gains will be included in the formula to increase the amount of SS subject to taxes, lower the tax brackets and thresholds for CG and dividend taxation, etc. So, they won't be taxed (technically), but they'll increase the taxes you pay on other income.
I doubt that. Roth money has already been taxed once, unlike 401k, IRA, pension money.

But who knows?
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Old 06-11-2015, 08:21 PM   #25
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As samclem said, they are not likely to tax Roth money directly. But the tax formula is likely to change so that when the Roth money is added to your income, it pushes more of your SS, dividends, cap gains, what have you, into higher tax brackets.

In a similar way, currently SS is not taxed if it's your only income, but is taxable if you have other sources. Tax is levied depending on your ability to pay. Has always been that way.
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Old 06-11-2015, 08:30 PM   #26
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You can pull out Roth contributions at any time with no tax or penalty. I see no way they could include this in your earnings since a person could just take it all out in one lump sum, stick it under the mattress and pay themselves for the next decade while not getting taxed on SS.

Roth gains, maybe they could claim this increases your income for calculating taxes on other money. Technically you could do the same thing with this money...take it all out in one year, pay tax on your SS that year, then pay yourself the next decade while paying no tax on SS.

It would all get very complicated.
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Old 06-11-2015, 08:31 PM   #27
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SS will be there. It is already means tested via tax on benefits. Politicians will panic in or around the year 2021 and remove the cap on income subject to SS and raise the % of benefits taxed for high income pensioners and maybe middle income pensioners.
This.

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There are a lot of things I worry about SS going bankrupt is not even in the top 1000.
That.
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Old 06-11-2015, 08:35 PM   #28
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You can pull out Roth contributions at any time with no tax or penalty...
Under current laws, yes.

Strange things have happened before. Didn't the US ban private possession of gold before? People had to surrender their gold to the gummint at a fixed price. Failure to do that would result in a fine of up to $182K in today's dollars, and up to 10 years in jail, in addition to having all your gold confiscated. Several people who hid their gold were prosecuted, including one fellow who lost 5000 oz of gold.

See: Executive Order 6102 - Wikipedia, the free encyclopedia.

Remember that the gummint can do whatever it wants, and can change its mind anytime.
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Old 06-11-2015, 08:47 PM   #29
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I doubt that. Roth money has already been taxed once, unlike 401k, IRA, pension money.
The contributions were taxed, the earnings on them were not. And as others have mentioned, they wouldn't be >taxing< the Roth earnings, but when they are withdrawn they cause other income to be taxed at higher rates. Promise kept (technically), "life's lottery winners" get to pay more.
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Old 06-11-2015, 08:59 PM   #30
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We could drive ourselves nutty trying to figure out things the government could do in the future.

They could mandate that all pensions, public and private be reduced to a cap of $20,000 a year. They could force 401K owners to convert to an annuity. Roths could be taxed. Cats could be required to lay with dogs.
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Old 06-11-2015, 09:28 PM   #31
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... or nationalize or reverse privatize all 401k, 403b, IRA, pension, etc... and put it all in the SS lock box.

I hope it would not go that far, but again stranger things have happened. Remember how bank accounts were seized in Cyprus not so long ago? One second, it's your money. The next second, it's gummint's money.

So, am I staying up late at night worrying about it? No. But it would not surprise me much when unthinkable things happen.
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Old 06-12-2015, 07:24 AM   #32
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There are a lot of things I worry about SS going bankrupt is not even in the top 1000.
I'm more worried I'll get run over by my neighbor's teenager who can't seem to stop texting while driving.
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Old 06-12-2015, 11:41 AM   #33
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I'm more worried I'll get run over by my neighbor's teenager who can't seem to stop texting while driving.
Well hopefully your neighbor's son is well insured and you can sue the crap out of him. Social Security reduction risk negated upon receipt of jury award!
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Old 06-12-2015, 11:57 AM   #34
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For those with a significant taxable pension (about $34K and up) you will already be subject to a reduction in SS since 85% of it will be taxed at your marginal rate (15% & 25% are common). So if your SS is $20K you will "lose" $3K - $5K in addition to the usual deduction for MC (at least $104 a month; or $1,248 a year). This to my way of thinking is be a significant "reduction" in benefits.
In the example you give if you are a married couple 34K pension and 20K Social Security will result in 6K of social security benefits being taxable with $1,600 taxable at 15 percent and 4,400 taxable at 10 percent , a tax of 680 dollars.

If you are single $13,000 of benefits would be taxable at 15% for a tax of $1,950.

Total tax for the couple with 54K of income and using standard deductions and exemptions would be $2,055 or less than 4 percent of total income. Single taxpayer would pay $4,915 or about 9 percent of income.
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Old 06-12-2015, 09:43 PM   #35
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I am hopeful the young gen y aka millenials fill the pot...

Being a gen x,then, I should be ok.

Right ?
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Old 06-12-2015, 11:52 PM   #36
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I'm in the camp of believing that SS will be taxed more so in the future in order to "cut" the benefit and keep things in balance. I sincerely hope they don't mess with the age any more. I'm only 54 and I see people at work who are in their late 60's and while they are healthy, they are not keeping up with the stress of today's work. And I work in an office where's it's at least physically possible to work late into life. What does a 70 year old construction worker do I would like to see a sliding scale for retirement age based on the job; though I know there is no way that could ever be managed and therefore just a theoretical dream.
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Old 06-13-2015, 09:19 AM   #37
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It surprises me how many people don't know that they are not (significantly) boosting their SS benefits by working after 55.

At that point one is just paying into the system and loosing last healthy years in an office. Statistically those healthy years end in high 60s.
Typically, those that are still working past 55 have other reasons to do so than maxing out SS. I have never heard of a single person working past 55 for the primary reason to max out SS. If you have enough capital to retire at 55, I'm sure 99% of the people would not keep working to simply get a little more SS.

Is your comment in response to something in particular? was there a post I missed that said some people work until 65 to max out SS? If someone says that they are working to 65 to max out SS, I'm willing to bet it's actually more of a function of them simply not having sufficient savings to retire before 65.

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The contributions were taxed, the earnings on them were not. And as others have mentioned, they wouldn't be >taxing< the Roth earnings, but when they are withdrawn they cause other income to be taxed at higher rates. Promise kept (technically), "life's lottery winners" get to pay more.
I'm surprised that people always forget that double taxation has ALREADY taken place in the mid 90s, given that up to 30% of your SS payments are clearly double-taxed with income taxes. Since the gov't has already set the precedent of being able to get away with this, taxing a ROTH for those who have "millions" is surely a political walk-in-the-park to appease the masses.


Edited to add:

Didn't see Independent's post a few pages back that stated this: (it's news to me!)

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Taxation of benefits
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Beginning in 1984, Federal law subjected up to 50 percent of an individual’s or a couple’s OASDI benefits to Federal income taxation under certain circumstances. Treasury allocates the revenue derived from this provision to the OASI and DI Trust Funds on the basis of the income taxes paid on the benefits from each fund. Beginning in 1994, the law increased the maximum percentage from 50 percent to 85 percent. The HI Trust Fund receives the additional tax revenue resulting from the increase to 85 percent.
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Old 06-13-2015, 10:08 AM   #38
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I know a couple who worked until 70 to max out their SS. They could not live on their meager SS if claimed at 65, and had little savings to live on until 70.
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Old 06-13-2015, 10:22 AM   #39
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I know a couple who worked until 70 to max out their SS. They could not live on their meager SS if claimed at 65, and had little savings to live on until 70.
If you worked from age 25 to 65 and saved just $100 a week, invested at 5% real, you would have $600,000, yielding $24,000 a year by itself.

Either your couple did not know how to save or they had some unfortunate event which wiped out their nest egg earlier in life.
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Old 06-13-2015, 11:59 AM   #40
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... they had some unfortunate event which wiped out their nest egg earlier in life.
This. From a "black swan" when they were 50, and had to start again from bare hands.
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