"Investing" in Medicare and SS

[MichealKnight]

I am 48, Wife is 45. RE'd 3 years ago. Pre-Future cuts in benefits, they say I'd get $2.308 per month at age 62.

Wifey has never ever worked not one day. I've been toying with the idea on putting her on payroll with hopes of accruing certain benefits and was hoping someone might critique if needed or offer an opinion.

My LLC is basically just to collect rent and with depreciation, the yearly profit shows zero for now. I feel there will be profits one day - if I sell houses for capital gains, OR if I finally succeed at flipping a few houses (made 19 offers last year, no deals, grrrrrr but I digress)

SO - Wifey goes on LLC payroll $7,000 yearly. 401K or Roth it to zero out Federal Tax.

Costs to me
***********
$1,200 per year: Payroll Service.

$1,071 per year: 15.3% FICA taxes paid by her and LLC combined.

=$2,271 expenses.

BUT with "earned income" we'd qualify for Child Tax Credit for 2 kids.

$1,700x2 rREFUNDABLE =. +$3,400 Yearly addition.

So..... -2271 in expenses, PLUS $3,400 in Child Tax Refund = $1,129 profit per year.
*******

She's 45 now. According to calculators....if she gets her 10 years of SS credits then at age 62:

$49.00 per month in SS benefits = $600 a year income (rounding)

MEDICARE PART A: As of now she'd have to pay $505 a month for it but if she has 10 years of work....that goes to zero.

So at age 62: $500 yearly SS. $6000 yearly medicare savings *and* .......this would be inflation adjusted to some extent.

I look at this and it seems pure profit, and the most sure-thing investment I could possibly make. In terms of legalities: Her job description is clerical and realistic, $7000 per year could be 5 hours a week sorting mail, filing stuff, searching for house listings, whatever if it's written down and wages are market real.

From Age 62, if we made it to....82......20 years of $6,500 yearly benefits.

It seems too easy to me.

Hence, I've posted here for opinions. Thanks for reading.

 

[SecondCor521]

The FICA will be a bit less than what you calculated - see Schedule SE for the details. You'll be entitled to a deduction for half of that, which might help also.

Refundable child tax credit is only $1600 per child for 2023, not $1700. But they keep changing the amounts, so who knows what it will be.

Currently CTC is only for kids under age 17 - not sure how old your kids are. Once your oldest hits 17 your math no longer works.

Your wife probably is entitled to spousal SS benefits even without paying in for 10 years, and those spousal benefits are probably more than the $500 per year you figured. Ditto Medicare Part A - she can get it through your work record.

 

[Out-to-Lunch]

SO - Wifey goes on LLC payroll $7,000 yearly. 401K or Roth it to zero out Federal Tax.

Very small point, but if she contributes those funds to a Roth, you still will owe tax on it. Maybe you meant "contribute it to a tIRA."

 

[GrayHare]

Important to consider spousal benefits in your calculations.

 

[bada bing]

She qualifies for Medicare based on your record as long as you have qualified yourself.

Her SS payment on her record would only be a net profit for any years she could file before you file for yours. When you file, she'll be eligible for spousal on your record, which presumably is a lot more than her minimum claim.

As a general rule, paying FICA is a good deal under the 1st bend point for the benefits qualified for, but only if you don't have spousal claim. From what you laid out, paying FICA for a minimum benefit on your wife would be a pretty poor return as far as SS benefits.

One thing you might consider is a strategic divorce. That would allow your (ex)wife to begin drawing spousal on your record as soon as she reaches 62 while you delay your claiming. You could remarry her after you claim SS to entitle her to survivor benefits. During the interim you're divorced you could also marry someone else with a low/no SS earnings record and if the interim marriage lasted 10 years, that person could draw spousal on your record as well. Lots of ways to maximize the SS rules.

Of course I'm being (sort of) factious . But the rules do work that way if you want to game the system.

 

[pb4uski]

...Your wife probably is entitled to spousal SS benefits even without paying in for 10 years, and those spousal benefits are probably more than the $500 per year you figured. Ditto Medicare Part A - she can get it through your work record.

...As a general rule, paying FICA is a good deal under the 1st bend point for the benefits qualified for, but only if you don't have spousal claim. From what you laid out, paying FICA for a minimum benefit on your wife would be a pretty poor return as far as SS benefits. ..

+1 She'll probably get over $600/year just based on your work record so what you outlined would get a 0% return. Has she set up an account and logged into ssa.gove and seen what she will get?

 

[MichealKnight]

thanks for all replies. Question - - just to clarify if I understand.

It was said that she'd get spousal benefits. '
So at age 62.... I am getting $2300 monthly SS, Plus my Medicare A - free.

Spousal benefit - does that mean her Medicare A is also - no cost

Also, SS - if she didn't work, how would she qualify for monthly SS benefit....perhaps I'm not understanding? I thought - I'd keep my $2300 per month, and she'd add $600 per year by my putting her in 40 quarters of payroll. Of course, if she was gonna get free Medicare A anyway then this whole exercise is sort of not worth it ?

 

[MichealKnight]

Googled it and y'all are right. I can't believe someone who never worked can get "free" medicare A...I'm just a bit floored but ok, I didn't make the rules.

SORT of on topic..... my kids are 15 and 12. I wonder if it's worth it to do the same thing with them - get them on payroll, give them a head start to hitting 40 quarters. Disability is the thing I'd like to know they are qualified for, god forbid if ever needed.

 

[GrayHare]

instead of $600 per year she'll get a spousal benefit of $13800 (12 months x half your benefit)

 

[Aerides]

Wifey has never ever worked not one day.

I can't believe someone who never worked can get "free" medicare A...I'm just a bit floored but ok, I didn't make the rules.

Ok she might never have worked for a paycheck outside the home but she's raising your two children, so to say "never worked" is a bit of an insult to any stay-at-home-parent.

And to imply that those who do the work of raising a family should not get healthcare in old age like everyone who goes out for a job seeks to deny millions of (primarily) women for generations who have taken this role, almost always in a partnership and agreement with their spouse.

 

[SecondCor521]

SORT of on topic..... my kids are 15 and 12. I wonder if it's worth it to do the same thing with them - get them on payroll, give them a head start to hitting 40 quarters. Disability is the thing I'd like to know they are qualified for, god forbid if ever needed.

I wouldn't and didn't.

It's pretty easy to hit 4 SS credits per year, so only 10 years to qualify on your own record. Or a marriage that lasts long enough to qualify on a spouse's.

Disability at a young age is relatively uncommon. If they want to cover that remote risk, they could probably purchase disability insurance on the private market or through their employer for far less than whatever payroll taxes you'd pay.

It's also arduous and not guaranteed to qualify for SS disability as I understand it.

If you're going to hire someone for your business anyway, it's something the kids can do, and it doesn't interfere with their educations, then sure. But I wouldn't jump through hoops and make work just to qualify for SS disability.

 

[Winemaker]

Googled it and y'all are right. I can't believe someone who never worked can get "free" medicare A...I'm just a bit floored but ok, I didn't make the rule.

DM quit working as a cashier 4 weeks before I was born, maybe 4 years total. Raised 4 of us kids. She collected half DF's SS for 5 years until he passed, then another 16 years on spousal benefits.


My purpose to post this is not to insult anyone, put to say, yes, this how the rules work out. And my DM and DE were pleasantly surprised when DF signed up for his benefits when he turned 65 and DM found out she was eligible for a SS benefit check.

 

[Bigdawg]

Ok she might never have worked for a paycheck outside the home but she's raising your two children, so to say "never worked" is a bit of an insult to any stay-at-home-parent.

And to imply that those who do the work of raising a family should not get healthcare in old age like everyone who goes out for a job seeks to deny millions of (primarily) women for generations who have taken this role, almost always in a partnership and agreement with their spouse.

My children must not have been raised. I mean how could they with my DW and I both being on active duty until after my kids graduated HS. Maybe it's magic that I now have a 30 yr old DS and a 28 yr old DD who are highly educated and successful. Maybe gremlins came in and cleaned the house, did the laundry, washed the dishes and helped the kids with their homework. Anecdotally my experience tells me the benefit from a stay-at-home spouse is not worth it. The 10-20 that I knew far underperformed their working spouse counterparts. My DM stayed home until I was in kindergarten then finished a fabulous career as a social worker specializing in childcare. The stay-at-home spouses (mostly women) I knew who I respected were adults who did many extra things besides JUST stay home and raise the kids. They would baby sit other kids, work some seasonal part time, add to their work hours as the kids got older and didn't need as much attention. They also transitioned to full time when the kids graduated HS. In my opinion any adult who has NEVER worked a job is ...... None of the words I would insert there are positive. I am all for charity and taking care of those less fortunate. That never includes a perfectly healthy adult capable of contributing to society. This is probably not an opinion shared by most. If you are a person who was the greatest stay-at-home spouse in the history of stay-at-home spouses, then more power to you and congratulations. I am expecting my first granddaughter this week. I will work diligently to ensure she is strong, independent and is never interested in being a stay-at-home mother. If she (or my DD) decide(s) to stay home temporarily with children, I will support that decision. Obviously, they will do what they want. The most attractive thing in the world to me is a strong women who doesn't need me.

 

[ivinsfan]

And here we go. I might point out this snarl fest started with the OP apparently not spending even one minute educating himself on how SS actually works and will apparently end with a poster trashing all stay at home Moms.



In all sincerity I have to ask what on earth has happened to this board?

 

[Aerides]

I didn't intend to turn this into a debate on stay at home parenting, as it is a choice made in each family, and by and large our society aims to support whatever way two parents decide is best for their family. Whether that is two working parents, or one in the home and one out, or single family households, or multi-generational arrangements. Or super rich with a nanny. I don't care.

But, to dismiss the stay-at-home parent as "never working" and to imply they should not be eligible for medicare is simply not accurate or fair.

 

[freedomatlast]

No need to get all excited. "Working" in this case means W-2 or 1099 income that qualifies for social security and medicare benefits, not a debate on whether a stay at home mom's job is harder or easier that one that works outside the home.

 

[GrayHare]

Yes, spousal benefits mean someone who has not paid money into the system can get money from it. System shortfalls become an expense of their children and grandchildren.

 

[Donno]

I am 48, Wife is 45. RE'd 3 years ago. Pre-Future cuts in benefits, they say I'd get $2.308 per month at age 62.

Aside from what everyone else has mentioned above, do you still have earned income that you pay SS tax on? I might be mistaken, but when you look up your future SS benefit, I think they assume that you will continue to earn what you have in the past. If you don't have any earned income and have all zero's for future earnings, your future benefit will be much smaller than $2300.

 

[MichealKnight]

Thankss

She qualifies for Medicare based on your record as long as you have qualified yourself.

Her SS payment on her record would only be a net profit for any years she could file before you file for yours. When you file, she'll be eligible for spousal on your record, which presumably is a lot more than her minimum claim.

.

Thanks everyone for writing. A few people mentioned the above, that a non-working spouse gets a spousal social security benefit. I know I can Google this but I prefer real people....

Snapshot: I stopped working around 45. All tools say currently, @62 I'd get $2300 a month.

Am I understanding correctly.....that my Wife, who never paid a dime of FICA..... would get $1,150 per month SS ....in ADDITION to my benefit? Meaning....

@62 I get $2300 per month. !@62, she gets $1150 per month....and this is not a death benefit, rather, it's literally $1150 per month even though she didn't work?

 

[N02L84ER]

Something else you may not realize. If you retire early, after 5 (I think) years of having $0 work income and not paying any Medicare taxes, you are no longer eligible for Disability payments.

 

[SecondCor521]

Thanks everyone for writing. A few people mentioned the above, that a non-working spouse gets a spousal social security benefit. I know I can Google this but I prefer real people....

Snapshot: I stopped working around 45. All tools say currently, @62 I'd get $2300 a month.

Am I understanding correctly.....that my Wife, who never paid a dime of FICA..... would get $1,150 per month SS ....in ADDITION to my benefit? Meaning....

@62 I get $2300 per month. !@62, she gets $1150 per month....and this is not a death benefit, rather, it's literally $1150 per month even though she didn't work?

Yes, you've got it basically right.

There will be some reductions that apply to spousal benefits since you're claiming early, but I think the amount will still be substantial.

You can confirm this by going to the horse's mouth at

https://www.ssa.gov/oact/quickcalc/spouse.html

Also, as long as you meet the requirements, she'll probably be eligible for surviving spouse benefits, meaning when you die, the smaller check (hers) stops, and she'll continue to get $2300 a month for the rest of her life.

 

[bada bing]

Thanks everyone for writing. A few people mentioned the above, that a non-working spouse gets a spousal social security benefit. I know I can Google this but I prefer real people....

Snapshot: I stopped working around 45. All tools say currently, @62 I'd get $2300 a month.

Am I understanding correctly.....that my Wife, who never paid a dime of FICA..... would get $1,150 per month SS ....in ADDITION to my benefit? Meaning....

@62 I get $2300 per month. !@62, she gets $1150 per month....and this is not a death benefit, rather, it's literally $1150 per month even though she didn't work?

The rules are a bit more convoluted than that. Your DW will get a spousal benefit that will be 1/2 your FRA benefit if she starts at her FRA (67) and you have already started your benefit. If she starts sooner, her spousal will be reduced. The reduction is around 6.67% per year started early, but it isn't straight line for the whole 5 years. Basically, she will get 1/2 of your age 62 benefit if she also starts at age 62 but that's not exactly how that number is calculated. You must start taking your benefit before her spousal can start. Another issue is that your and her eventual benefits are going to be inflation adjusted and you'll both be getting more than you quoted in nominal terms. The yearly adjustments, like everything else about SS are a bit convoluted, using two different inflation indexes depending on your age.

It is important to understand the mechanics before starting benefits. I'd recommend anyone study a bit to get up to speed on how the system works, especially when they get to planning age. Claiming strategies can make a significant difference in lifetime benefits received. If you surf here on this forum you'll discover that Social Security claiming strategies are one of, if not the most posted topics. Ad Naseum As an example, because you are 3 years older than your wife, an efficient claiming strategy might be for you to delay claiming until your wife reaches age 62 and then both claim at the same time. There are also earned income limits on drawing SS before your FRA, so that may be a consideration.

TLDR: Yes, your wife will get a spousal benefit in addition to the benefit you get.

 

[ivinsfan]

Thanks everyone for writing. A few people mentioned the above, that a non-working spouse gets a spousal social security benefit. I know I can Google this but I prefer real people....

Snapshot: I stopped working around 45. All tools say currently, @62 I'd get $2300 a month.

Am I understanding correctly.....that my Wife, who never paid a dime of FICA..... would get $1,150 per month SS ....in ADDITION to my benefit? Meaning....

@62 I get $2300 per month. !@62, she gets $1150 per month....and this is not a death benefit, rather, it's literally $1150 per month even though she didn't work?

Your spousal number is wrong as you'll see on the SS,site

 

[oldtimer]

DM quit working as a cashier 4 weeks before I was born, maybe 4 years total. Raised 4 of us kids. She collected half DF's SS for 5 years until he passed, then another 16 years on spousal benefits.

The 5 years your DM collected half of DF's SSis called "spousal" benefit. The 16 years after his death she received "survivor" benefit. Too many people confuse spousal with survivor - different benefits & different calculations/rules.

 

[MichealKnight]

wow

Something else you may not realize. If you retire early, after 5 (I think) years of having $0 work income and not paying any Medicare taxes, you are no longer eligible for Disability payments.

Wow, I had no idea- I thought once I was in, I'm in.

I'll research to see what the minimum income is and if attainable, I'll either do payroll'd work, or salary myself and pay the taxes that way.