Social Security

[Major Tom]

Include at least 100% and delay until age 70.
That's what all of us do...

I'm a little confused by this post. I cannot tell whether to take it at face value, or whether you meant it as some kind of joke/sarcasm.

Not everyone here waits until 70, and many have said in the numerous previous threads on this subject that in their calculations, they planned for a figure less than 100% of their current predicted SS payout. I can think of one prominent member who began claiming early during the 2008/2009 downturn. There are others here who claimed early too.

If your comment was intended humorously, I don't think it was very helpful.

 

[FiveDriver]

During my w*orking years, I would look at the FICA deduction for Social Security. At that time, my Dad's monthly 'Entitlement' was almost that same amount. I considered it my gift to Dad.
And I did not count on Social Security or Medicare to be there in my retirement projections.

Now, I collect my FRA amount, a princely sum even after my Medicare Part B is deducted. That money turns out to be a big part of our retirement.

There are over 70 million people collecting SS checks. The party in power that reduces these benefits commits political suicide in full public view.

A good start towards solvency is to increase the wage base for FICA deductions. Even the 2025 increase to $176K income is still too low. Higher wage earners are not reluctant about claiming full benefits upon their retirement. It's time they contributed up to their higher base wage.

 

[Gumby]

.....

A good start towards solvency is to increase the wage base for FICA deductions. Even the 2025 increase to $176K income is still too low. Higher wage earners are not reluctant about claiming full benefits upon their retirement. It's time they contributed up to their higher base wage.

There was a time in my life when I hit the max FICA wage at the end of February, when our yearly bonuses were paid out, whereupon I would immediately get a 6.2% boost in my take home pay for the rest of the year. At that point, I really would not have missed the money.

 

[Koolau]

There was a time in my life when I hit the max FICA wage at the end of February, when our yearly bonuses were paid out, whereupon I would immediately get a 6.2% boost in my take home pay for the rest of the year. At that point, I really would not have missed the money.

Yeah, I had a boss, back in the day, who walked out of his office after the bonus hit in February and announced "It's sure nice to have your Social Security paid off." Of course, back then, I think the limit was something like $7800.

 

[Flieger]

Here's to hoping the follow through on no tax on SS (and Tips for that matter)!

Flieger

 

[TheWizard]

Here's to hoping the follow through on no tax on SS (and Tips for that matter)!

Flieger

Actually, the income tax i pay on 85% of my SS feeds back into the so called Trust Fund and helps to some degree to extend the solvency period of the SS system.

Any proposal to eliminate taxation of SS, without a companion fix to the system, would be totally ill-conceived.
But let's not get political, shall we?

 

[Gumby]

I pay tax on 85% of my social security and I think that is the right thing to do, since every month's check is comprised of about 15% return of my contributions and 85% of subsequent earnings on those contributions, which have never been taxed.

 

[GenXguy]

Actually, the income tax i pay on 85% of my SS feeds back into the so called Trust Fund and helps to some degree to extend the solvency period of the SS system.

That's what I thought with regarding ending WEP, giving spousal benefits, and SS tax holidays. It does make sense that the taxed income thresholds be indexed to inflation since those thresholds were put into place in 1983, which has resulted in it catching more people in the lower income ranges with more taxes every year since.

 

[TheWizard]

That's what I thought with regarding ending WEP, giving spousal benefits, and SS tax holidays. It does make sense that the taxed income thresholds be indexed to inflation since those thresholds were put into place in 1983, which has resulted in it catching more people in the lower income ranges with more taxes every year since.

That was by design, an intended consequence.
The goal here is to get almost everyone having 85% of their SS benefit taxable, you see...

 

[Gumby]

That's what I thought with regarding ending WEP, giving spousal benefits, and SS tax holidays. It does make sense that the taxed income thresholds be indexed to inflation since those thresholds were put into place in 1983, which has resulted in it catching more people in the lower income ranges with more taxes every year since.

Everyone should be paying on 85%. The sliding scale for lower incomes was put there to gain support for the change. There is no real logic to it beyond that. The lack of indexing was an attempt to make things right over time.

 

[GenXguy]

That was by design, an intended consequence.
The goal here is to get almost everyone having 85% of their SS benefit taxable, you see...

Of course, it will catch more people if nothing is done to fix it, but I don't think tax on SS should be eliminated completely, just some updating due to inflation.

References:

https://www.marketwatch.com/story/people-who-saved-for-retirement-are-being-punished-by-social-security-taxes-2019-01-07

This 33-Year-Old Social Security Rule Is Wreaking Havoc on Seniors' Retirement Income | The Motley Fool

If lawmakers addressed this issue, millions of seniors would probably see an immediate boost in their annual income.

www.fool.com

Double Whammy: the Taxation of Social Security Benefits

This week, Gail explains how the government takes away a piece of your Social Security benefits.

www.foxnews.com

 

[Flieger]

But let's not get political, shall we?

My comment is on following through with some promises (made by both sides of the aisle), not about WEP or GPO. That has been completed and I have ignored the thread.

I think though potentially a decrease to funding, both of the potential breaks I mentioned could be beneficial to lower income.

For the SS side, I agree with GenXGuy on increasing the start point for the tax if not eliminating it. While I agree that the tax was "an" attempt to push SS plan toward solvency, so were the other actions that have been changed, so this should not be sacrosanct either IMO.

No tax on Tips would really help at the lower end. I am seeing now with my new Gig just how much! Tips are close to 75% of the hourly wage reported on my first pay check. IF I were having to survive largely on this type of income, it certainly would go a long way to have that part removed from my taxable income. I am working with a lot of "young" people using this to help with living their life, not just getting out to have interaction after retirement like me (although there is one other in the same boat). What a help that would be for those folks in paying off debt, saving for a house, etc!

 

[Gumby]

I'd bet that everyone would be financially better off if they didn't have to pay tax on 75% of their income, but at some point someone has to pay for our public goods, like Social Security, Medicare/Medicaid and the Department of Defense (which are all paying someone else's income).

 

[Flieger]

I'd bet that everyone would be financially better off if they didn't have to pay tax on 75% of their income, but at some point someone has to pay for our public goods, like Social Security, Medicare/Medicaid and the Department of Defense (which are all paying someone else's income).

I agree. Our system is base on a progressive system so it's just a matter of "degrees". But you are right, someone has to pay for those items, no doubt.

Flieger

 

[scrabbler1]

When I was putting together my ER plan back in 2007-08, I split it into 2 parts. The first part was getting to age 45 (my age in 2008) to age ~60 using only the taxable part of my portfolio. This means no SS, no frozen company pension, no unfettered access to my rollover IRA. None of those 3 assets, which I often refer to as my "reinforcements," ever counted in that part of my ER plan.

I turned 60 last year, so I gained unfettered access to my rollover IRA. However, things have been going so well using only my taxable account that I can just leave the IRA alone and let it keep growing (it has quadrupled in value to nearly $1M since late 2008 even though it has had at least 45% in bonds the whole time). The frozen pension is not accessible until I turn 65, and I can access SS at 62 with a reduction; my FRA is 67.

The IRA and frozen pension would be more than enough to supplement the taxable account. If SS disappeared it would not slow me down. With only a 23-year earnings history, that's a lot of zeroes of annual wage earnings in the benefit calculation anyway, so SS would not be a whole lot.

If Social Security's "Do-Nothing Plan" goes into effect, the one that many politicians on both sides of the aisle seem to advocate today, then its 21% across-the-board benefit reduction in 10 years won't faze me very much.

 

[Closet_Gamer]

My comment is on following through with some promises (made by both sides of the aisle), not about WEP or GPO. That has been completed and I have ignored the thread.

I think though potentially a decrease to funding, both of the potential breaks I mentioned could be beneficial to lower income.

For the SS side, I agree with GenXGuy on increasing the start point for the tax if not eliminating it. While I agree that the tax was "an" attempt to push SS plan toward solvency, so were the other actions that have been changed, so this should not be sacrosanct either IMO.

No tax on Tips would really help at the lower end. I am seeing now with my new Gig just how much! Tips are close to 75% of the hourly wage reported on my first pay check. IF I were having to survive largely on this type of income, it certainly would go a long way to have that part removed from my taxable income. I am working with a lot of "young" people using this to help with living their life, not just getting out to have interaction after retirement like me (although there is one other in the same boat). What a help that would be for those folks in paying off debt, saving for a house, etc!

I will have to politely disagree.

No tax on tips makes no sense economically or otherwise. We could also have no tax on Fridays. That would really help too.

No tax on tips is just a tortured way to support lower income workers and enable companies to underpay workers… and it can only accelerate a broken and out of control tipping culture that masks companies not paying fair wages. Similar to how many employees also get earned income tax credits or government assistance. It’s a giant back door giveaway to companies. With no tax on tips both McDs and their employees have a financial incentive to list the price of a Big Mac as $2 but then auto-include a $3 tip.

Depending on its implementation, it will also drain away funds from SS/Medicare.

There was a time in my life when I worked for tips. It was cash so I didn’t pay taxes on it whereas everything being electronic makes it easy to tax tips … but it also makes it easy to ask for a 20% tip when in a cash world the change went in the tip jar. Double edged sword.

Let’s remove all the incentives to underpay workers.

If we really want to help the lower end of the income spectrum, bump the standard deduction. Easy peasy.

My $0.02.

 

[Winemaker]

All things considered, most tip income is not reported anyway. Back when my kids were servers, they were told to report up to the minimum wage, and no more. More recently, a family member who was an assistant manager/bar tender at a local specialty beer themed restaurant did the same. We have had heated but cordial discussions about that over the years as I said they were gaming the situation.

After she had her first child, I introduced her to an employer that had offered her $15/hour, health care benefits, 401k, PTO, and reduced pricing on a motor vehicle. She turned it down saying she needed $21/hour to break even. If she took the offer, she would have to start paying for health insurance for 2, lose the food stamp equivalent, reduced prescriptions and free child care.

They're not paying taxes now so the point is moot.

As far as SS is concerned, my SS benefit at 70 is projected to be ~$5000/ month, if not trimmed. My employer and I only paid $240k into it in total. I'll break even in 4 years. If they don't want me to pay taxes on it, so be it.

 

[Flieger]

Let’s remove all the incentives to underpay workers.

Who decides what "underpaying" is? I prefer for it to be the job market. Also, i am not willing to pay the increase product cost for the $15 pr $20 "minimum" wage.

Not getting in to more of the SS arguments on here....

I like the tip system as it allows ME to determine if someone has done a great job and deserves more pay.

Just my 20%

Flieger

 

[klec]

I've been thinking about this lately. No eligible for a few years and wondering how much of it will still be around. When I enter how much we are going to get I usually cut it in half for firecalc and other calculators.

What are your thoughts on SS?

How much of it do you include for the future in your calculations?

At some point, I would expect some kind of means testing with SS. Personally, I waited until 70 since I didn’t need it earlier. It was the right move for me.

 

[Flieger]

All things considered, most tip income is not reported anyway.

I thought that too as that is how it was when I bartended in college (100% cash), but not true nowadays. All tips are reported for "reputable" companies through payroll, especially as most are done through CC transactions.

Flieger

 

[Rianne]

I thought that too as that is how it was when I bartended in college (100% cash), but not true nowadays. All tips are reported for "reputable" companies through payroll, especially as most are done through CC transactions.

Flieger

I always try to tip in cash. Everyone has a hand held calculator/register that gives you choices 5%, 10%, 20%, 25%. When I hand them 20% in cash, I always get a smile and a thank you. Cash is king. Whether or not they claim it is up to them.

 

[Flieger]

I always try to tip in cash. Everyone has a hand held calculator/register that gives you choices 5%, 10%, 20%, 25%. When I hand them 20% in cash, I always get a smile and a thank you. Cash is king. Whether or not they claim it is up to them.

I guess that could be up to the individual. In my current Gig, all tips are split between Bartenders and "floor" team, so 1 person can't take cash as that would leave others out. We do have some cash tips, but they are added to the tip pool at the end of each shift along with CC tips.

Flieger

 

[Walt34]

I thought that too as that is how it was when I bartended in college (100% cash), but not true nowadays. All tips are reported for "reputable" companies through payroll, especially as most are done through CC transactions.

Which is why we always pay the tip in cash, just to make sure the person who earned it is the one who receives it. Too many employers skim from employees as it is; I'm not going to make it easier for them. As to whether they pay taxes on it, that's between them, their conscience, and the IRS.

 

[Flieger]

Which is why we always pay the tip in cash, just to make sure the person who earned it is the one who receives it. Too many employers skim from employees as it is; I'm not going to make it easier for them. As to whether they pay taxes on it, that's between them, their conscience, and the IRS.

You might be disappointed, see post above.... Pretty sure if I tried to keep for myself I would be terminated for stealing from my fellow bartenders.

Flieger

 

[Winemaker]

I always try to tip in cash. Everyone has a hand held calculator/register that gives you choices 5%, 10%, 20%, 25%. When I hand them 20% in cash, I always get a smile and a thank you. Cash is king. Whether or not they claim it is up to them.

I tip in cash to folks that work to maintain great service. Poor service results in a low credit card tip