SS benefit taxes

[Koolau]

I didn't read all the replys, but if not mentioned, I like to think of this tax as nice because the Gubmint lets me have 15% of SS income tax free!

If it makes you feel good, then, by all means enjoy. I'm a little less joyous when gummint lets me keep my OWN money. I won't even go into what they spend MY money on.

 

[Koolau]

Actually, I did this exercise with mine. I did a spredsheet with my earnings from my earnings record from my SS statement. Then I retrieved the SS rates for each year and recalculated the taxes that I paid and the total was pretty close to the total shown on my SS statement and it was within a couple hundred $$$. I took 72% of that, assuming that 28% related to life insurance and disability income insurance. These were annual outflows.

Then I added annual inflows for my PIA and then inflated it at 4% per annum until age 82. Calculated an IRR of estimated cashflows from 1970 (age 15) to 2037 (age 82). IRR was 6.86%... a little better than the return on 100% bonds from 1926-2021 according to Vanguard.

I also played with a few different COLAs... IRR is 6.28% with a 2% COLA and 7.43% with a 6% COLA.

Not bad IRR methinks.

Someone has too much time on their hands!

 

[pb4uski]

Perhaps. I just got sick and tired of hearing people complain about SS being a raw deal, that they could have done better saving on their own (if they really had the fiscal discipline to save on their own, but most people don't), etc and wanted to see if it was at all true.

 

[Midpack]

Pension?

What's that??

+1. Though in retrospect Megacorp probably did me a favor ending pensions in 1994 when I was 40 yo. Fortunately I’d saved and invested a lot but no pension forced me to get that much more serious about being 100% self reliant on reaching FI. Overdid that and retired at 57, so it worked out great (so far). I did get $204K from my frozen Megacorp pension, but nothing like a pension.

 

[camfused]

Back in 1999, Megacorp switched some people over to a cash balance plan, from the pension. If you were 40, and had more than 15 years with the company, you could stay on the pension plan. I had 17 years with them, but I was 13 days shy of being 40. Was I pissed off! So, no pension for me either.

 

[PatrickA5]

Back in 1999, Megacorp switched some people over to a cash balance plan, from the pension. If you were 40, and had more than 15 years with the company, you could stay on the pension plan. I had 17 years with them, but I was 13 days shy of being 40. Was I pissed off! So, no pension for me either.

I hear ya! I was 5 years away from a 60% pension when my company merged with another company and our pension was replaced with a cash balance plan. It was funded with a whopping $15K.

 

[Venturer]

I had in 10 years when my company stopped our plan. It was frozen to whatever amount was in it. Then about 5 0r 6 years ago they did away entirely with it and we were offered a lump sum or an amount we could get monthly at 65 if we wanted it. Whether rightly or wrongly I was told the best thing to do was take the lifetime monthly, which I did with a full lifetime benefit for my DW so she wouldn't be relying only on her SS. Her SSi smaller than mine and her pension is from PBGC because OMC went bankrupt and closed the plants down. If we had a 72k pension I for sure wouldn't be crying and bi****g about the taxes. But I see it & hear it with some of my former classmates that had gummint jobs which they retired from at some rediculous age with a 75 to 85% of salary .

 

[HenryD]

Is there such a thing as "pension envy"?

Never had access to any pension.

Best move financially - stay married! (I threw that in for free - oh, and YMMV.)

The best thing I ever did for my mental health, and by far the worst thing financially was get divorced. I'll never recover the money nor time, but I am happily remarried. Life is good there.

No chance of any inheritance, in fact, we're financially supporting our aging parents, none of whom own any real estate or investments. Nothing.

We've saved, lost most of, and saved again every penny of the barely seven figures we have, and our social security will be taxed like everyone else's. Tell me again how your pension is 'only' x That comment isn't addressed to the op or anyone else, just a rant.

 

[Irishgirlyc58]

I’m pretty sure people here who have pension envy could have opted to work for a government agency that provides pensions just like anyone else. The choice was yours.
Then you could’ve complained about the year end bonuses that you never received.
And I’m sure many other benefits working in the private sector as opposed to the public sector.

 

[anethum]

I’m pretty sure people here who have pension envy could have opted to work for a government agency that provides pensions just like anyone else. The choice was yours.
Then you could’ve complained about the year end bonuses that you never received.
And I’m sure many other benefits working in the private sector as opposed to the public sector.

Similar to what others have written above, I worked for many years (10+ in my case) for a Megacorp which touted their pension plan & retiree health benefits when they offered me a job. One day in the 1990s when I was already 40+ years old, I came into work one morning and found a memo stating that the pension plan was ending immediately, and that unless you were already fully vested, all you would be getting was a "cash value" amount which was a pittance of the value of a pension. The "cash value" was less than half of what my annual salary was at the time. I rolled it over into my IRA.

Some of us don't have that perfect crystal ball that you apparently had.

Furthermore, some of the public sector pension amounts people have mentioned in these forums are downright obscene. You're damn right I'll complain when somebody with a large public pension and retiree health insurance benefits starts complaining about their taxes.

 

[Irishgirlyc58]

Similar to what others have written above, I worked for many years (10+ in my case) for a Megacorp which touted their pension plan & retiree health benefits when they offered me a job. One day in the 1990s when I was already 40+ years old, I came into work one morning and found a memo stating that the pension plan was ending immediately, and that unless you were already fully vested, all you would be getting was a "cash value" amount which was a pittance of the value of a pension. The "cash value" was less than half of what my annual salary was at the time. I rolled it over into my IRA.

Some of us don't have that perfect crystal ball that you apparently had.

Furthermore, some of the public sector pension amounts people have mentioned in these forums are downright obscene. You're damn right I'll complain when somebody with a large public pension and retiree health insurance benefits starts complaining about their taxes.

Your complaint is with your former employer not people who didn’t work for that employer.

I can’t speak to how the OP retirement system works but I know how my retirement system works.
I paid certain percentage of my salary into the system. The government agency typically matched that amount. The majority of the funding for the pension comes from the investments of the system not the contributions.
During the late 90’s and early 00’s my retirement system was “super funded” due to these investments.
I was still required contribute my percentage but local governments contributed nothing.

 

[Koolau]

Perhaps. I just got sick and tired of hearing people complain about SS being a raw deal, that they could have done better saving on their own (if they really had the fiscal discipline to save on their own, but most people don't), etc and wanted to see if it was at all true.

There you go again, trying to take away our fun, whining about SS. Pretty soon, you'll tell us not to whine about the IRS! What is this world coming to?

 

[Koolau]

+1. Though in retrospect Megacorp probably did me a favor ending pensions in 1994 when I was 40 yo. Fortunately I’d saved and invested a lot but no pension forced me to get that much more serious about being 100% self reliant on reaching FI. Overdid that and retired at 57, so it worked out great (so far). I did get $204K from my frozen Megacorp pension, but nothing like a pension.

Yeah, I would have to admit that there was a time or two when the only thing keeping me at Megacorp was the golden handcuffs of my un-vested pension. Turns out, I'm glad I had those handcuffs. Things turned out well for the last several years of my c@reer - until they didn't. Then I left with a full (un-reduced) pension.

All in, it w*rked out okay and I do like having my pension, "modest" and un-cola'd as it is. Possibly the best thing Megacorp did for me was retiree medical supplementation (the rules changed over the years, but the benefit was and still is worth the hardship experienced at Megacrop.) THAT was worth waiting for. Heh, heh, from what I hear, I would NOT want to be starting a c@reer at Megacorp NOW. YMMV

 

[Midpack]

I came into work one morning and found a memo stating that the pension plan was ending immediately, and that unless you were already fully vested, all you would be getting was a "cash value" amount which was a pittance of the value of a pension. The "cash value" was less than half of what my annual salary was at the time. I rolled it over into my IRA.

If it makes you feel any better, when the Megacorp I worked for froze all pensions in 1994, we couldn't have access to our frozen pensions (actually choice of lump sum or annuity) until we retired. Lots of folks who were only a few years from retirement did retire a little earlier than they'd planned, since their pensions would not grow any more from more service years - all what Megacorp was expecting would happen. I retired from another (private) company altogether and still had to wait until 2011. I got a $204K lump sum in 2011, the cash value in 1994 had to be peanuts after 17 years...

 

[anethum]

Your complaint is with your former employer not people who didn’t work for that employer.

I can’t speak to how the OP retirement system works but I know how my retirement system works.
I paid certain percentage of my salary into the system. The government agency typically matched that amount. The majority of the funding for the pension comes from the investments of the system not the contributions.
During the late 90’s and early 00’s my retirement system was “super funded” due to these investments.
I was still required contribute my percentage but local governments contributed nothing.

No, please don't tell me where my complaint lies.

One of my complaints in this discussion is when someone with a generous public pension complains about their taxes.

My second complaint is when government retirees in these forum discussions have made comments similars to yours (and I have read it here before), that essentially, the rest of us pensionless suckers made stupid decisions. I find it offensive to read "I’m pretty sure people here who have pension envy could have opted to work for a government agency that provides pensions just like anyone else. The choice was yours."

As I and others in this discussion have pointed out, many of us took private sector jobs that supposedly provided pensions & retiree health insurance, only to have the rug pulled out from under us years later. It's adding insult to injury to be told "the choice was yours".

 

[Gumby]

...
One of my complaints in this discussion is when someone with a generous public pension complains about their taxes.....

If we have a private pension can we complain about taxes?

 

[48Fire]

When a Social Security payout possibility was getting close, I added my projected income into TurboTax to see the tax impact. Easy enough. It is what it is, and I am just grateful I am getting my first payment on February 8th.

 

[anethum]

If we have a private pension can we complain about taxes?

"the choice [is] yours"

 

[Irishgirlyc58]

No, please don't tell me where my complaint lies.

One of my complaints in this discussion is when someone with a generous public pension complains about their taxes.

My second complaint is when government retirees in these forum discussions have made comments similars to yours (and I have read it here before), that essentially, the rest of us pensionless suckers made stupid decisions. I find it offensive to read "I’m pretty sure people here who have pension envy could have opted to work for a government agency that provides pensions just like anyone else. The choice was yours."

As I and others in this discussion have pointed out, many of us took private sector jobs that supposedly provided pensions & retiree health insurance, only to have the rug pulled out from under us years later. It's adding insult to injury to be told "the choice was yours".

[emoji58]
This is me, not saying anything.

 

[pb4uski]

I’m pretty sure people here who have pension envy could have opted to work for a government agency that provides pensions just like anyone else. The choice was yours.
Then you could’ve complained about the year end bonuses that you never received.
And I’m sure many other benefits working in the private sector as opposed to the public sector.

That's the point. Those who worked in similar roles in government jobs often earned less than in the private sector but that detriment was offset by generous pension benefits. I personally don't have pension envy at all, but I do find complaints by retired civil servants about having to pay taxes on their government pension benefits extremely annoying. We've paid taxes on our additional earnings for years, and at higher incremental rates, so those with generous government pension benefits don't get to complain about taxes on those pension benefits. Suck it up buttercup.

Yes there are other benefits to working in the private sector... longer hours, much higher stress, jerks for bosses, and the list goes on and on and on.

 

[Irishgirlyc58]

That's the point. Those who worked in similar roles in government jobs often earned less than in the private sector but that detriment was offset by generous pension benefits. I personally don't have pension envy at all, but I do find complaints by retired civil servants about having to pay taxes on their government pension benefits extremely annoying. We've paid taxes on our additional earnings for years, and at higher incremental rates, so those with generous government pension benefits don't get to complain about taxes on those pension benefits. Suck it up buttercup.

Yes there are other benefits to working in the private sector... longer hours, much higher stress, jerks for bosses, and the list goes on and on and on.

You are assuming that you had longer hours and higher stress.
Not all government jobs are 8-5 M-F and low stress just like not all private sector jobs are long hours and high stress.

To counter your annoyance about tax complaints I get annoyed with people who didn’t have a pension but now conversely have a whole lot of money in investments that they can then manipulate their income and avoid taxes. I read about it all the time.
The response is typically well I’m within the rules so it’s ok.
My complaint isn’t about how much tax I pay it’s about how the system enabling people to manipulate their income and then those people complaining about my income. My pension is also well within the rules.

 

[Koolau]

If we have a private pension can we complain about taxes?

Sure. Just don't do it here. Find someone who cares and tell them.

 

[pb4uski]

You are assuming that you had longer hours...

You really don't want to go there. How many overnighters did you pull in your government job? How many 2-3 am days?

 

[athena53]

Yes there are other benefits to working in the private sector... longer hours, much higher stress, jerks for bosses, and the list goes on and on and on.

What? There are no jerks working in the public sector? I find that hard to believe and I bet they're even harder to get rid of in the public sector.

 

[pb4uski]

... I bet they're even harder to get rid of in the public sector.

Fair point.