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Old 02-03-2021, 01:49 PM   #61
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Originally Posted by foxcreek9 View Post
Be prepared for those with "large" IRA balances, including Roth, to have their SS cut, not just taxed.
I don't think this idea would ever get enough votes to pass, from both parties.
Most likely SS tax will be increased for higher earners, and eligibility age may be lifted a bit too.
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Old 02-03-2021, 02:33 PM   #62
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I don't think this idea would ever get enough votes to pass, from both parties.
Most likely SS tax will be increased for higher earners, and eligibility age may be lifted a bit too.

I hope you are right, but they already tax 85% of SS, taxing the remaining 15% will bring in pocket change. The next logical step is offsetting benefits based on some formula. And remember that the SS tax threshold is not indexed, so it would eventually tax everyone.
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Old 02-03-2021, 06:06 PM   #63
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Agree and there also should not be availability of multiple ex spouses claiming on the same person.
I have to disagree on this one for the reasons athena53 outlines below. While usually my politics are to the right of Attila the Hun, can you imagine the number of women who would be flat-out destitute without that benefit? And it's not like they're buying new Porches with the proceeds, they're doing well if it covers rent on a low-rent efficiency apartment and groceries. Also, I suspect there aren't that many "multiple ex-spouses" claiming benefits on one guy's SS record. They have to be married for at least ten years to make the claim.

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It's good public policy. I qualify on my own record but my Mom and my DDIL are/were stay-at-home mothers. Imagine the cost to public programs if widows of primary earners got zero or minimal amounts based only on their own work record after the death of a spouse. Plenty out there are already struggling on Survivor benefits (and there are proposals to increase those). In theory, the cost of spousal benefits is priced into the SS contributions.
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Old 02-04-2021, 12:11 AM   #64
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The reasons for the cap are long and part of a storied tax/political history. I believe the chief argument in favor of the cap is linked to similar caps on payouts. IE, the super high earners do not receive a similar super high SS payment in retirement.
That still doesn't make sense to me. All of us pay taxes for things we don't benefit from.

I pay taxes for schools even though I'll never have a kid in school again. I pay taxes for emergency services, though I hope I'll never need them. I pay taxes for roads I'll never drive on. I pay taxes for libraries but never use their services. Why shouldn't all of my income be taxed even if my own SS benefits are limited?
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Old 02-04-2021, 12:53 AM   #65
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That still doesn't make sense to me. All of us pay taxes for things we don't benefit from.

I pay taxes for schools even though I'll never have a kid in school again. I pay taxes for emergency services, though I hope I'll never need them. I pay taxes for roads I'll never drive on. I pay taxes for libraries but never use their services. Why shouldn't all of my income be taxed even if my own SS benefits are limited?
I'm guessing you don't know how the bend points work. People who pay the cap for a career pay much, much more per dollar of SS benefit than people with lower earnings records. There is a considerable amount of income redistribution built into SS and upper earners already subsidize lower earners to a considerable degree. SS was sold politically as an "earned" benefit, which for the majority of participants it is not. About 80% of SS recipients didn't fully "earn" the benefits they receive in an actuarial sense. That is why it is often touted as the most popular government program, 80% are getting more than they paid for.

If everyone receiving SS got the same relative payback as someone who paid the cap for their career, there would be no shortfall. The trust fund would be swimming in surpluses. The reason it is not isn't because those at the top are paying too little, it is because those at the bottom are given too much. That isn't a political statement, it is just basic math.
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Old 02-04-2021, 01:32 AM   #66
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That still doesn't make sense to me. All of us pay taxes for things we don't benefit from.

I pay taxes for schools even though I'll never have a kid in school again. I pay taxes for emergency services, though I hope I'll never need them. I pay taxes for roads I'll never drive on. I pay taxes for libraries but never use their services. Why shouldn't all of my income be taxed even if my own SS benefits are limited?
But you do benefit from all those things. Schools, you benefit from the kid who becomes a doctor, engineer or scientist that discovers something that improves your life. Emergency services that saves lives of those who serve you in more ways than I could count; servers, lawyers, electricians, etc.
Roads, that deliver the goods you buy that makes your standard of living better. Same for libraries or any other services or critical infrastructure you don't actively engage in, you benefit because without them, your life would be extremely different than it is today.
Just because you don't utilize those services paid for through taxes doesn't mean your life isn't improved by them.
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Old 02-04-2021, 08:38 AM   #67
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At some point a society must find additional revenue to provide promised services to the citizens. Growth of population and science means people live longer, and the burden on services increases. Social Security is the best modern example of a necessary system that provided for many of our parents and grandparents. But sustaining the system will require more funding to stay on a reasonable course. It's inevitable the ages will be increased.

There are enough demagogues for/against every policy I've read about in my lifetime. It has always been this way, with the additional problem today of "everyone's an expert." If there is a compromise, such as recommended by panels in the past, we can go along with it.

Compromise is the challenge of our last days on earth. We've been suckered into believing our measurement of worth is some shade of Blue or Red.
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Old 02-04-2021, 09:42 AM   #68
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I would propose, we eliminate the payroll cap. At the same time we add a 3rd bend point in benefits at that level for those who would be affected? That way they get something from the fruit of their labor. And the net would be a positive for the masses.

I admit that I am not affected by any of this. I already have my benefits defined. I only was above the cap 1 or maybe 2 years during my entire working years. I never did understood why there was a cap at all.
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Old 02-04-2021, 10:05 AM   #69
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Just because you don't utilize those services paid for through taxes doesn't mean your life isn't improved by them.
Yes, that's my point. Even if I don't use a service directly, paying taxes to support them improves society in general. Paying taxes for social security helps older generations, even if I don't receive payments directly.

It's not like we just kick seniors to the curb (usually) if SS doesn't cover their expenses. Other services like Medicaid and food assistance cover what they can't afford, and someone is paying taxes for those services. I have a feeling fewer seniors would need these services if SS incomes were improved so seniors could retire with dignity.
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Old 02-04-2021, 10:29 AM   #70
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Why should there be a spousal benefit at all? If you work and contribute, you should get a benefit based on that. If you don't (i.e. - non working spouse) you shouldn't. So, I'd look at it slightly differently - your wife is getting a free ride for the spousal amount in excess of her own benefit.
There is no spousal benefit for the UK equivalent of SS, called OAP. If you donít have 40 quarters working then you donít get OAP. When a spouse dies that OAP simply stops, the surviving spouse gets nothing extra.

In a family, if one of the spouses stays at home to look after young children they get credited with a full year towards OAP. In our case it was my wife who took a few years off work to look after our children. We had 2 children, 18 months apart, so on my wifeís OAP contributions record she has 7 years credited during that time we had at least one child under age 5 and she wasnít working.
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Old 02-04-2021, 10:39 AM   #71
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I have to disagree on this one for the reasons athena53 outlines below. While usually my politics are to the right of Attila the Hun, can you imagine the number of women who would be flat-out destitute without that benefit? And it's not like they're buying new Porches with the proceeds, they're doing well if it covers rent on a low-rent efficiency apartment and groceries. Also, I suspect there aren't that many "multiple ex-spouses" claiming benefits on one guy's SS record. They have to be married for at least ten years to make the claim.
Thanks. The thing I love most about SS is that nearly everybody who collects from it has to contribute to it or be married to somebody who does. If we cut off the spouses, they would simply be added to the welfare rolls. At least with SS somebody had to put some money into the system for a descent amount of time.

Several times, I have told the story about four older ladies I know who live together on nothing but their SS checks and the un-mortgaged home one of them owns. It's not an extravagant life, but it keeps them off the streets and off the welfare rolls.
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Old 02-04-2021, 12:20 PM   #72
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Thanks. The thing I love most about SS is that nearly everybody who collects from it has to contribute to it or be married to somebody who does. If we cut off the spouses, they would simply be added to the welfare rolls. At least with SS somebody had to put some money into the system for a descent amount of time.
Survivor benefits are a separate animal from spousal benefits. I have no issues with the survivor benefit.
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Old 02-04-2021, 02:15 PM   #73
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Yes, that's my point. Even if I don't use a service directly, paying taxes to support them improves society in general. Paying taxes for social security helps older generations, even if I don't receive payments directly.

It's not like we just kick seniors to the curb (usually) if SS doesn't cover their expenses. Other services like Medicaid and food assistance cover what they can't afford, and someone is paying taxes for those services. I have a feeling fewer seniors would need these services if SS incomes were improved so seniors could retire with dignity.
i mostly agree with this position. i never did understand the purpose for the cap. we have no cap for purposes of income tax so why is there a cap for the SS tax? (redundant q...no need to reply). i do not agree with a basic income for everyone but do agree that SS benefits ought to be increased for those at lower income levels and maybe even gradually phased out for those of us at higher income levels. what that phased-out income level is, well that's the question.

personally I always considered SS to be just one leg of our retirement plan in addition to pension and savings/investment. 40-years ago never in my wildest imagination did I think my wife and I would retire with a NW in the low 7-figures. SS provides 22% of our annual income and because of it we don't have to touch the investments but we do have the wherewithal to replace it especially when our RMDs kick in next year. i'd be in favor of a legitimate...non-political-but-what-is-best-for-the country...debate on this. and yes, I know...dream on.
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Old 02-04-2021, 03:21 PM   #74
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Several points on this subject:

SS is one leg of retirement for a majority predominately, those w/o pensions. It is a two legged stool for most. And a one legged stool for too many. That SS is partly depended upon for retirement is significantly the government's fault...

By 1990, the Social Security OASI tax rate increased from under 3% (1960) to 12.4%. Imagine how large everyone's IRA/401(k) would be if that extra 9.4% instead went into their IRA for the last 30 years. Everyone would potentially be self sufficient.
For those that claim "the employer pays half" I'll argue that the tax increase enacted in 1983 was the start of the pay raise that no longer kept up with inflation. Your employer sent extra money to SS instead of giving larger raises.
So I'll assert that the government, in 1983, passed legislation that guaranteed the majority of Americans would become dependent on SS for retirement because it took money that could have gone into an IRA/401(k).

Thanks for the heads up on SB-4180. It appears to be dead.

Rep. John B. Larson (CT-01) will serve as Chairman of the Social Security Subcommittee again. On Dec 2, 2020 Larson indicated he will re-introduce an emergency bill to address the Pandemic induced benefits cut to those born in or after 1960. I could locate no other legislation related to this issue.
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Old 02-04-2021, 04:36 PM   #75
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I have never seen evidence that increased social security taxation rates are the cause of wage stagnation since the 1980s. I have seen data that, for the last 30-35 years, the vast majority of income from productivity increases has flowed to holders of capital rather than laborers. It is an ineluctable feature of our economy that capital will always pay labor the least amount that it can and labor will try to get the most it can. However, for the last 35 years (and often with the government's help), capital has had the upper hand in that contest. I don't see that any of that money paid to social security would have been paid to workers instead of being passed along to shareholders. And I'd say that holds for any tax imposed at the business entity level. If that tax is cut, the benefit almost never flows back to the workers, instead it flows to the owners.
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Old 02-04-2021, 09:19 PM   #76
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Thanks. The thing I love most about SS is that nearly everybody who collects from it has to contribute to it or be married to somebody who does. If we cut off the spouses, they would simply be added to the welfare rolls. At least with SS somebody had to put some money into the system for a descent amount of time.

Several times, I have told the story about four older ladies I know who live together on nothing but their SS checks and the un-mortgaged home one of them owns. It's not an extravagant life, but it keeps them off the streets and off the welfare rolls.
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Old 02-05-2021, 06:46 AM   #77
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I have never seen evidence that increased social security taxation rates are the cause of wage stagnation since the 1980s. I have seen data that, for the last 30-35 years, the vast majority of income from productivity increases has flowed to holders of capital rather than laborers. It is an ineluctable feature of our economy that capital will always pay labor the least amount that it can and labor will try to get the most it can. However, for the last 35 years (and often with the government's help), capital has had the upper hand in that contest. I don't see that any of that money paid to social security would have been paid to workers instead of being passed along to shareholders. And I'd say that holds for any tax imposed at the business entity level. If that tax is cut, the benefit almost never flows back to the workers, instead it flows to the owners.

Also, a lot of growth that employers would have paid to employees in wages has instead gone to their ever-inflating health insurance.
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Old 02-05-2021, 08:56 AM   #78
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Donut holes are easier to pass the smell test. People in the donut hole (significant percent of the population) thinks that they are not affected with this legislation (until they realize few years later!) and don't complain/oppose. The outside edge of the donut hole is typically a small percent of the constituents and hence easy to shove those complains aside. Inside portion of donut hole is the safe zone. I think this is a classic trick for passing many bills into a law.


The possibility of this donut hole legislation was instrumental in my overcoming One More Year syndrome. So the threat of raising my taxes is going to result in one less person paying into the system at all, let alone to the Maximum. Taxes elicit market response that frequently result in far less revenue being collected than was forecast when the tax was enacted.
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Old 05-07-2021, 03:09 AM   #79
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I would propose, we eliminate the payroll cap. At the same time we add a 3rd bend point in benefits at that level for those who would be affected? That way they get something from the fruit of their labor. And the net would be a positive for the masses.
Folks,

I have seen 3 posts by regular/respected posters here that seem to have a similar misunderstanding on current Social Security policy/law that applies to SS payouts for high income earners.

There is no cap on payout today. We do not need to add new bend-points to take care of high income earners -- the current bend-points will payout under today's law.

The only reason that we have a so-called "cap" on SS payouts is that there is a cap on wages that are subject to SS taxation and a maximum number of earning years that are considered in the payout formula . If we raised the cap on taxable SS wages, the high income workers would have larger SS payouts.

Please don't advocate new bend-points without understanding the mechanics of the current payouts. It will only enable the politicians to reduce benefits while making it sound like something else.

Edit:
Here is a link to a Social Security worksheet from a few years ago that you can manually walk through to see how the benefit was calculated in 2018. It is much more illustrative than a computer calculator IMHO.

Thanks
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Old 05-07-2021, 08:36 AM   #80
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Folks,

I have seen 3 posts by regular/respected posters here that seem to have a similar misunderstanding on current Social Security policy/law that applies to SS payouts for high income earners.

There is no cap on payout today. We do not need to add new bend-points to take care of high income earners -- the current bend-points will payout under today's law.

The only reason that we have a so-called "cap" on SS payouts is that there is a cap on wages that are subject to SS taxation and a maximum number of earning years that are considered in the payout formula . If we raised the cap on taxable SS wages, the high income workers would have larger SS payouts.

Please don't advocate new bend-points without understanding the mechanics of the current payouts. It will only enable the politicians to reduce benefits while making it sound like something else.

Edit:
Here is a link to a Social Security worksheet from a few years ago that you can manually walk through to see how the benefit was calculated in 2018. It is much more illustrative than a computer calculator IMHO.

Thanks
-gauss
Since you quoted my post, I feel it necessary to explain my post a bit better. The "payroll cap" I was referring to was the working person's income at which SS is no longer taxed; "Column A. Maximum earnings" in your referenced SSA pdf. In 2021 that max is $142,800. This effectively creates an "effective" cap on SS monthly monthly benefits.

Some proposals I have read suggest we simply remove the income level cap and continue taxing incomes above that $142,800. As you say, if everything else is left as is, it would eliminate the (effective) cap on benefits. Some don't feel that those people need or deserve benefits above the 2021 maximum benefit level of $3,148 at FRA. That "limit" would be kept and no additional monies be included in benefits. The devil is in the details as to how that law would be written. It could go either way.

One may or not agree with taxing income with no maximum. And if they are included, whether that higher average income should be included in the monthly benefit at a 15% level. My suggestions was there should be a compromise of sorts with no limit on income taxed and a much lower 4th level added, but not zero, benefit from that higher income starting at todays "maximum" income taxed.

I hope this comes out more clear.
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